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Unformatted text preview: Chapter 7 Homework Assignment Answer/Review Sheet EXERCISES E4. LO 1 In this solution, supplies and travel are assumed to vary with revenue. Supplies as a percent of revenue $15,000 $201,000 0.0746 Travel as a percent of revenue $2,000 $201,000 0.0100 Increase in revenue $36,000 Less: Cost of exhibit space 12,000 Increase in supplies (.0746 $36,000) 2,686 Increase in travel (.0100 $36,000) 360 Increase in profit $20,954 The company should exhibit at the show since the impact on profit is positive. E6. LO 1, 2, 4 a. The incremental profit is $410 as follows: Revenue $65 150 $ 9,750 Less cost of unprepared food and beverage $42 150 6,300 3,450 Lost revenue $50 160 (8,000) Cost savings for food and beverage $31 160 4,960 Loss profit ( 3,040 ) Net $ 410 b. As indicated above, the opportunity cost of accepting the New England group is $410. c. The restaurant should consider the fact that it may hurt its business with regulars who are turned away due to the closure. This could have serious long-term effects. E7. LO 1. 2 b, c, d, f, g, and i. E9. LO 2 a. False b. False c. True d. False e. True f. False E10. LO 2 d, f, g, and h. E11. LO 1 Incremental benefit (cost) of completing the phone: Price $125.00 Material (12.00) Direct Labor (13.00) Variable overhead (10 .00 ) Benefit $ 90 .00 Incremental benefit of selling partially completed phone: Price $100 .00 The company will be better off by $10 per phone if the company sells the partially completed units....
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