Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 5, Problem 5.7BYP
Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options.
Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an additional $4,500 above the cost of a traditional vehicle. The hybrid will get 40 miles per gallon of gas, and the traditional car will get 30 miles per gallon. Also, assume that the cost of gas is $3.60 per gallon.
Instructions
Using the facts above, answer the following questions.
(a) What is the variable gasoline cost of going one mile in the hybrid car? What is the variable cost of going one mile in the traditional car?
(b) Using the information in part (a), if “miles” is your unit of measure, what is the “contribution margin” of the hybrid vehicle relative to the traditional vehicle? That is, express the variable cost savings on a per-mile basis.
(c) How many miles would you have to drive in order to break even on your investment in the hybrid car?
(d) What other factors might you want to consider?
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Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of
your biggest personal expenditures. It is important that you carefully analyze your options.
Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an
additional $7,000 above the cost of a traditional vehicle. On average, the hybrid will get 60 miles per gallon of gas, and the traditional
car will get 30 miles per gallon. Also, assume that the cost of gas is $2.40 per gallon.
Using the facts above, answer the following questions.
(a)
For gasoline, what is the unit variable cost of going one mile in the hybrid car? What is the unit variable cost of going one mile in
the traditional car? (Round answers to 2 decimal places, e.g. 0.25.)
Hybrid car
Traditional car
Variable gasoline cost
$
$
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Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of
your biggest personal expenditures. It is important that you carefully analyze your options.
Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an
additional $5,500 above the cost of a traditional vehicle. On average, the hybrid will get 45 miles per gallon of gas, and the traditional
car will get 27 miles per gallon. Also, assume that the cost of gas is $2.70 per gallon.
Using the facts above, answer the following questions.
(a)
For gasoline, what is the unit variable cost of going one mile in the hybrid car? What is the unit variable cost of going one mile in
the traditional car? (Round answers to 2 decimal places, e.g. 0.25.)
Variable gasoline cost $
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Hybrid car
Traditional car
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You have just graduated from college and are looking to buy your first car. Money is tight right now, so you are concerned with initial cost as well as ongoing expenses. At the same time, you don't
want to drive a slow, outdated car like your parents do. You have narrowed your choices down to two vehicles: a Honda Enigma and a Bizzarrini Booster. Based on the numbers below, calculate the
value index for each car. Which car provides you with the greatest value?
Click the icon to view the data table.
The value index for Honda Enigma is. (Enter your response as a whole number)
The value index for Bizzarrini Booster is (Enter your response as a whole number)
provides the greatest total value index
A
The
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Dimension
Fuel economy
Reliability
Speed and handling
Aesthetics
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Honda Enigma
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Bizzarrini Booster
Importance
to you
3
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Honda
Enigma
value index for each car. Which car provides you with the greatest value?
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Chapter 5 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 5 - (a) What is cost behavior analysis? (b) Why is...Ch. 5 - (a) Scott Winter asks your help in understanding...Ch. 5 - Contrast the effects of changes in the activity...Ch. 5 - J. P. Alexander claims that the relevant range...Ch. 5 - The relevant range is indispensable in cost...Ch. 5 - Prob. 6QCh. 5 - How should mixed costs be classified in CVP...Ch. 5 - At the high and low levels of activity during the...Ch. 5 - "Cost-volume-profit (CVP) analysis is based...Ch. 5 - Faye Dunn defines contribution margin as the...
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 14QCh. 5 - Define the term margin of safety. If Revere...Ch. 5 - Prob. 16QCh. 5 - Prob. 17QCh. 5 - Monthly production costs in Dilts Company for two...Ch. 5 - Prob. 5.2BECh. 5 - For Wesland Company, a mixed cost is 15,000 plus...Ch. 5 - Bruno Company accumulates the following data...Ch. 5 - Markowis Corp. has collected the following data...Ch. 5 - Determine the missing amounts.Ch. 5 - Russell Inc. had sales of 2,20O,0O0 for the first...Ch. 5 - Rice Company has a unit selling price of 520,...Ch. 5 - Presto Corp. had total variable costs of 180,000....Ch. 5 - For Flynn Company, variable costs are 70% of...Ch. 5 - Prob. 5.11BECh. 5 - Prob. 5.12BECh. 5 - Amanda Company reports the following total costs...Ch. 5 - Westerville Company accumulates the following data...Ch. 5 - Prob. 5.3DICh. 5 - Snow Cap Company has a unit selling price of 250,...Ch. 5 - Presto Company makes radios that sell for 30 each....Ch. 5 - Bonita Company manufactures a single product....Ch. 5 - Shingle Enterprises is considering manufacturing a...Ch. 5 - The controller of Norton Industries has collected...Ch. 5 - Family Furniture Corporation incurred the...Ch. 5 - The controller of Hall industries has collected...Ch. 5 - PCB Corporation manufactures a single product....Ch. 5 - Marty Moser wants Moser Company to use CVP...Ch. 5 - All That Blooms provides environmentally friendly...Ch. 5 - The Palmer Acres Inn is trying to determine its...Ch. 5 - In the month of March, Style Salon services 560...Ch. 5 - Spencer Kars provides shuttle service between four...Ch. 5 - In 2016. Manhoff Company had a break-even point of...Ch. 5 - Billings Company has the following information...Ch. 5 - Naylor Company had 210,000 of net income in 2016...Ch. 5 - Yams Company reports the following operating...Ch. 5 - Glacial Company estimates that variable costs will...Ch. 5 - Felde Bucket Co., a manufacturer of rain barrels,...Ch. 5 - Vin Diesel owns the Fredonia Barber Shop. He...Ch. 5 - Jorge Company bottles and distributes B-Lite, a...Ch. 5 - Tanek Corp.'s sales slumped badly in 2017. For the...Ch. 5 - Mary Willis is the advertising manager for Bargain...Ch. 5 - Prob. 5.5APCh. 5 - Kaiser Industries carries no inventories. Its...Ch. 5 - Bill Johnson, sales manager, and Diane Buswell,...Ch. 5 - Creative Ideas Company has decided to introduce a...Ch. 5 - The condensed income statement for the Peri and...Ch. 5 - Prob. 5.3BYPCh. 5 - Prob. 5.4BYPCh. 5 - Your roommate asks for your help on the following...Ch. 5 - Prob. 5.6BYPCh. 5 - Cost-volume-profit analysis can also be used in...
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- using excelAssume you've graduated and get the dream job and need transportation to go to work (problem definition)-so you need to purchase a car (objective).You would like to analyze your financial options to purchase the car you want andat the same time spent the minimum possible (decision making criteria).You prefer to pay around 3000$/year (requirements)but if it helps to reduce the cost you can pay more.Explore the options of (compare alternatives to save $) 1- Getting a loan of 20K over 5 years at 5%, how much is your yearly payments. Hint: (=PMT(i,n,p) ) 2- Searching for a better loan at 4%- how much you save? (compare total interest paid I1-I2)3- Try to pay up your loan quicker like 3 years- See how much you save in Interest paid. (compare total interest paid ) 4 - Negotiated the purchase down to 18.5K and see how much you save in interest. (compare total interest paid as well as the total paid) 5- Put down more money at the…arrow_forward6. (Note, for this question, you may find information from the live session in Module 4 useful.) You are making a decision about purchasing a new car. You can choose between an electric vehicle that requires very high upfront costs, a somewhat cheaper hybrid vehicle and a traditional gasoline powered vehicle. Your discount rate for future cash flows is 10%. The upfront cost of each car is: Electric: $80,000 Hybrid: $60,000 Gas: $45,000 In the first year you estimate the running costs (including fuel, insurance, maintenance etc.) to be: Electric: $2,000 Hybrid: $5,000 Gas: $7,500 You assume that these costs will increase at an inflation rate of 5%. That is, year 2 costs will be 5% higher than year 1 costs and year 3 costs will be 5% higher than year 2 costs. a) You plan to keep the car for 10 years. For each car, calculate the present value of your costs. Which one ends costing less in present value terms? (1 pt) b) If instead you wanted to replace the car after 5 years, what would now…arrow_forwardYour business is considering the selection of hybrid trucks as an alternative to conventional gasoline powered trucks. Based on the following data, should the hybrid trucks be selected over conventional? Use incremental rate of return analysis.arrow_forward
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