(a)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting the variable cost from sales revenue.
To calculate:
The contribution margin earned on each backpack.
(b)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting the variable cost from sales revenue.
To find out:
The contribution margin lost on each backpack donated to charity.
(c)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting the variable cost from sales revenue.
To find out:
The contribution margin if one backpack is donated with each backpack.
(d)
Concept introduction:
Contribution Margin: Contribution margin is the margin which is calculated by deducting the variable cost from sales revenue.
To find out:
The breakeven point of production and number of units to be sold and donated.
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Managerial Accounting
- Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. Angie has just received a degree in business and she is anxious to apply the principles she has learned to her business. In time, she hopes to open a chain of sandal shops. As a first step, she has prepared the following analysis for her new store: Sales price per pair of sandals $ 2.00 Variable expenses per pair of sandals 1.20 Contribution margin per pair of sandals $ 0.80 Fixed expenses per year: Building rental $ 9,000 Equipment depreciation 5,000 Selling 17,600 Administrative 18,000 Total fixed expenses $ 49,600arrow_forwardProblem: A T-shirt Business Shalon has a t-shirt business where she sells her own line of designer shirts. She is in it for the money. But in order to make money from selling her t-shirts, she needs to make sure her prices are at the right price point both in terms of making money and giving her customers a good deal. Shalon needs to take into consideration things like the cost of her time spent designing the shirts, the cost to manufacture the shirt, and the cost of keeping the store open. After all these costs are calculated, then she needs to figure out how much more she needs to add so she can make a good living from her t-shirt business. The total cost to make each shirt for Shalon is Php100. Of course, Shalon wants to make a profit from selling each shirt, so she sells the shirt for Php 300. (a.) . How much of a mark-on is this? (Explain your answer.) Shalon wants to make sure she is competitive with other t-shirt businesses in town, so she does some investigating of her own. She…arrow_forwardA tree provider to plant nurseries is trying to use customer lifetime value to determine the value of its customers. Two customers are shown below. Use customer lifetime value to determine the importance of each customer. Use a 7 percent discount rate. Avg. Annual Sales Avg. Profit Margin Customer A: Customer B: $26,500 $14,000 Do not round intermediate calculans. Round your answers to the nearest dollar. NPV (Customer A): $ 25% 15% Expected Lifetime 11 years 7 years NPV (Customer B): $ What do you recommend? -Select- is more important.arrow_forward
- Cost Behavior, High-Low Method, Pricing Decision Fonseca, Ruiz, and Dunn is a large, local accounting firm located in a southwestern city. Carlos Ruiz, one of the firm's founders, appreciates the success his firm has enjoyed and wants to give something back to his community. He believes that an inexpensive accounting services clinic could provide basic accounting services for small businesses located in the barrio. He wants to price the services at cost. Since the clinic is brand new, it has no experience to go on. Carlos decided to operate the clinic for 2 months before determining how much to charge per hour on an ongoing basis. As a temporary measure, the clinic adopted an hourly charge of $25, half the amount charged by Fonseca, Ruiz, and Dunn for professional services. The accounting services clinic opened on January 1. During January, the clinic had 120 hours of professional service. During February, the activity was 150 hours. Costs for these two levels of activity usage are as…arrow_forwardCreative Homework/Short Project Your friend's small business makes hand-crafted papers that she sells di- rectly to her customers online. Fortunately, her business is growing quickly, and she is considering selling her unique product to other businesses. From your market- ing class, you know that different channel structures exist for both consumer and B2B markets. Summarize the differences between these two channel structures. What advice can you give her?arrow_forwardBE5.7 - Using Excel to Determine Profitability Given a Constrained Resource Student Work Area PROBLEM Required: Provide input into cells shaded in yellow in this template. Input the required mathematical formulas or functions with cell references to the Problem area or work area as indicated. Rachel wants to use her knitting skills to make a little extra money so she can enjoy a theatre weekend with her besties. She’s got the pattern down for a hat, scarf, and mittens, but she realizes that her available time is limited. She should be able to sell as many of any item as she can make, but she wants to make sure she’s making the best use of her time. Cost and time information are provided here. Calculate the contribution margin per unit of the scarce resource for each item. Hat Scarf Mittens Hat Scarf Mittens Contribution margin per Time in minutes 20 30…arrow_forward
- Company XYZ is specialized in producing and selling smart watches. The company currently has two products and is planning to improve it profits in the coming years. The company is thinking of introducing a sales commission to encourage its sales people to make more sales and improve company's profitability. When designing the sales :commission the company should base the sales commission on The selling price a O The number of employees .b O The color of the product .c O The contribution margin .d O None of the given answers .e Oarrow_forwardA tree provider to plant nurseries is trying to use customer lifetime value to determine the value of its customers. Two customers are shown below. Use customer lifetime value to determine the importance of each customer. Use an 8 percent discount rate. Avg. Annual Sales Avg. Profit Margin 10% $12,500 $26,000 20% Do not round intermediate calculations. Round your answers to the nearest dollar. NPV (Customer A): $ NPV (Customer B): $ What do you recommend? Customer B ✓ Customer A: Customer B: is more important. Expected Lifetime 5 years 9 yearsarrow_forwardMother to Child Connection is a non-profit organizaton that employs abused and battered women staying in shelters. The mission of this orgainzation is to establish productive lifestyles for these women by employing them in the manufacture of affordable clothing for children. All proceeds fund the shelters in which these women live. Additional Information: Materials purchased on account: $15,500 Materials requisitioned and labor used: Job No. Materials Factory Labor 100 $2650 $1770 101 $1240 $650 102 $980 $420 103 $3420 $1900 104 $1000 $500 105 $2100 $1760 For general factory use: $450 $650 Factory overhead costs incurred on account: $2700 Depreciation on machinery: $1750 Factory overhead applied at a rate of 70% of direct labor cost Completed jobs this period: 101, 101, 102, 104 Shipped jobs: 100, 101, 102 and billed customers $8100, $3800, and $3500, respectively. Questions: a. Record journal entries for the transactions…arrow_forward
- Cost Information and Ethical Behavior, Service Organization Jean Erickson, manager and owner of an advertising company in Charlotte, North Carolina, arranged a meeting with Leroy Gee, the chief accountant of a large, local competitor. The two are lifelong friends. They grew up together in a small town and attended the same university. Leroy is a competent, successful accountant but is having some personal financial difficulties after some of his investments turned sour, leaving him with a 15,000 personal loan to pay offjust when his oldest son is starting college. Jean, on the other hand, is struggling to establish a successful advertising business. She had recently acquired the rights to open a branch office of a large regional advertising firm headquartered in Atlanta, Georgia. During her first 2 years, she was able to build a small, profitable practice. However, the chance to gain a significant foothold in Charlotte hinged on the success of winning a bid to represent the state of North Carolina in a major campaign to attract new industry and tourism. The meeting she had scheduled with Leroy concerned the bid she planned to submit. Jean: Leroy, Im at a critical point in my business venture. If I can win the bid for the states advertising dollars, Ill be set. Winning the bid will bring 600,000 to 700,000 of revenues into the firm. On top of that, I estimate that the publicity will bring another 200,000 to 300,000 of new business. Leroy: I understand. My boss is anxious to win that business as well. It would mean a huge increase in profits for my firm. Its a competitive business, though. As new as you are, I doubt that youll have much chance of winning. Jean: Youre forgetting two very important considerations. First, I have the backing of all the resources and talent of a regional firm. Second, I have some political connections. Last year, I was hired to run the publicity side of the governors campaign. He was impressed with my work and would like me to have this business. I am confident that the proposals I submit will be very competitive. My only concern is to submit a bid that beats your firm. If I come in with a lower bid and good proposals, the governor can see to it that I get the work. Leroy: Sounds promising. If you do win, however, there will be a lot of upset people. After all, they are going to claim that the business should have been given to local advertisers, not to some out-of-state firm. Given the size of your office, youll have to get support from Atlanta. You could take a lot of heat. Jean: True. But I am the owner of the branch office. That fact alone should blunt most of the criticism. Who can argue that Im not a local? Listen, with your help, I think I can win this bid. Furthermore, if I do win it, you can reap some direct benefits. With that kind of business, I can afford to hire an accountant, and Ill make it worthwhile for you to transfer jobs. I can offer you an up-front bonus of 15,000. On top of that, Ill increase your annual salary by 20%. That should solve most of your financial difficulties. After all, we have been friends since day oneand what are friends for? Leroy: Jean, my wife would be ecstatic if I were able to improve our financial position as quickly as this opportunity affords. I certainly hope that you win the bid. What kind of help can I provide? Jean: Simple. To win, all I have to do is beat the bid of your firm. Before I submit my bid, I would like you to review it. With the financial skills you have, it should be easy for you to spot any excessive costs that I may have included. Or perhaps I included the wrong kind of costs. By cutting excessive costs and eliminating costs that may not be directly related to the project, my bid should be competitive enough to meet or beat your firms bid. Required: 1. What would you do if you were Leroy? Fully explain the reasons for your choice. What do you suppose the code of conduct for Leroys company would say about this situation? 2. What is the likely outcome if Leroy agrees to review the bid? Is there much risk to him personally if he reviews the bid? Should the degree of risk have any bearing on his decision?arrow_forwardCost Behavior, High-Low Method, Pricing Decision Fonseca, Ruiz, and Dunn is a large, local accounting firm located in a southwestern city. Carlos Ruiz, one of the firms founders, appreciates the success his firm has enjoyed and wants to give something back to his community. He believes that an inexpensive accounting services clinic could provide basic accounting services for small businesses located in the barrio. He wants to price the services at cost. Since the clinic is brand new, it has no experience to go on. Carlos decided to operate the clinic for 2 months before determining how much to charge per hour on an ongoing basis. As a temporary measure, the clinic adopted an hourly charge of 25, half the amount charged by Fonseca, Ruiz, and Dunn for professional services. The accounting services clinic opened on January 1. During January, the clinic had 120 hours of professional service. During February, the activity was 150 hours. Costs for these two levels of activity usage are as follows: Required: 1. Classify each cost as fixed, variable, or mixed, using hours of professional service as the activity driver. 2. Use the high-low method to separate the mixed costs into their fixed and variable components. (Note: Round variable rates to two decimal places and fixed amounts to the nearest dollar.) 3. Luz Mondragon, the chief paraprofessional of the clinic, has estimated that the clinic will average 140 professional hours per month. If the clinic is to be operated as a nonprofit organization, how much will it need to charge per professional hour ? How much of this charge is variable? How much is fixed? (Note: Round answers to two decimal places.) 4. CONCEPTUAL CONNECTION Suppose the accounting center averages 170 professional hours per month. How much would need to be charged per hour for the center to cover its costs ? Explain why the per-hour charge decreased as the activity output increased. (Note: Round answers to two decimal places.)arrow_forwardBlake Cohen Painting Service specializes in small paint jobs. His normal charge is $350/day plus materials. Moesha needs her basement painted. Blake has produced a bid for $1 500 to complete the basement painting. Blake completed a cost estimate for his service as shown. A. Moesha mentions that she cant pay the $1500. She is a widow and you feel an obligation to take care of widows but cant lose money. How much would you charge and still be able to make a profit? B. Moesha has asked you to paint the rest of her house. Could you continue to give her the same deal?arrow_forward
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