fall 06 solution

fall 06 solution - ACCOUNTANCY 321 Fall, 2006 EXAM II...

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ACCOUNTANCY 321 Fall, 2006 EXAM II Solution I. A. $3,832,500/2,555,000 = $1.50 fixed cost per meal B. $3,832,500/2,190,000 = $1.75 fixed cost per meal 3.80 variable cost per meal $5.55 per meal C. I would expect the other seven hospitals to be concerned that the price per meal had increased. In addition, they would probably be concerned that quality of the meals might further decline. More of them may seek to purchase their meals from outside suppliers. D. The problem with the new price is caused by Omar-Chef having excess (or unused) capacity and the associated excess fixed costs. A death spiral can be a result, but not the cause. E. $3,832,500/3,650,000 = $1.05 fixed cost per meal at practical capacity Excess capacity cost = ($1.05) (3,650,000 - 2,555,000) = $1,149,750 F. The cost of unused capacity will increase as less meals are prepared and delivered to the remaining seven hospitals. Specifically: Excess capacity cost = ($1.05) (3,650,000 - 2,190,000) = $1,533,000
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II. A. The consigned goods are owned by the firm who has displayed them in the Bolie
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This note was uploaded on 01/06/2010 for the course ACCTG 321 taught by Professor Will during the Spring '08 term at San Diego State.

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fall 06 solution - ACCOUNTANCY 321 Fall, 2006 EXAM II...

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