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PROBLEM 5-15B Contribution Format versus Traditional Income Statement CHECK FIGURE (1) Net income is \$16,600 Costs Cost Formula Selling: Advertising \$500 per month Sales salaries and commissions \$1,000 per month, plus 8% of sales Delivery of toys to customers \$10 per toy sold Utilities \$500 per month Depreciation of sales facilities \$400 per month Administrative: Executive salaries \$1,500 per month Insurance \$200 per month Clerical \$500 per month, plus \$5 per toy sold Depreciation of office equipment \$300 per month During June, The Fun Store, Inc., sold and delivered 500 toys. Required: 1 Prepare an income statement for The Fun Store, Inc., for June. Use the traditional format, with costs organized by function. 2 3 Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis? PROBLEM 5-16B High-Low Method; Predicting Cost CHECK FIGURE (1) \$275,400 per month plus \$8.00 per bed-day During April, the clinics occupancy rate was only 80%. A total of \$390,600 in operating cost was incurred during the month. Required: 1 Using the high-low method, estimate: a. The variable cost per occupied bed on a daily basis. The Fun Store, Inc., purchases very large and heavy toys from a large manufacturer and sells them at the retail level. The toys cost, on the average, \$80 each from the manufacturer. The Fun Store, Inc., sells the toys to its customers at an average price of \$150 each. The selling and administrative costs that the company incurs in a typical month are presented below: Redo (1) above, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both a total and a per unit basis down through contribution margin. Black Forest Clinic contains 600 beds. The average occupancy rate is 90% per month. In other words, on average 90% of the clinics beds are occupied by patients. At this level of occupancy, the clinics operating costs are \$25 per occupied bed per day, assuming a 30-day month. This \$25 cost contains both variable and fixed cost elements. b. The total fixed operating costs per month. 2 Assume an occupancy rate of 85% per month. What amount of total operating cost would you expect the clinic to incur? PROBLEM 5-17B High-Low and Scattergraph Analysis CHECK FIGURE (1) \$5,508 per month plus \$34.80 per scan Month Utilities Cost January 20 \$6,000 February 50 \$7,200 March 80 \$8,400 April 60 \$7,740 May 100 \$8,988 June 70 \$7,800 July 30 \$6,600 August 10 \$5,856 September 40 \$6,660 October 90 \$8,400 Required: 1 2 Sinai Cedars Hospital of San Francisco has just hired a new chief administrator who is anxious to employ sound management and planning techniques in the business affairs of the hospital. Accordingly, she has directed her assistant to summarize the cost structure of the various departments so that data will be available for planning purposes.... View Full Document

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