Chapter 5 Solutions

Chapter 5 Solutions - Brief Exercise 51 (20 minutes) 1....

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Brief Exercise   5-1  (20 minutes) 1. Cups of Coffee Served  in a Week 2,000 2,100 2,200 Fixed cost. .................................. $1,200 $1,200 $1,200 Variable cost. .............................         440             462             484     Total cost. ................................... $1,640 $1,662 $1,684 Cost per cup of coffee served *. . $0.820 $0.791 $0.765 * Total cost ÷ cups of coffee served in a week 2. The average cost of a cup of coffee declines as the number of  cups of coffee served increases because the fixed cost is  spread over more cups of coffee. Brief Exercise 5-3  (30 minutes) 1. Occupancy- Days Electrical  Costs High activity level (August). . 2,406  $5,148  Low activity level (October). .     124         1,588       Change. ............................... 2,282   $3,560   Variable cost = Change in cost ÷ Change in activity = $3,560 ÷ 2,282 occupancy-days = $1.56 per occupancy-day Total cost (August). ........................................................ $5,148 Variable cost element  ($1.56 per occupancy-day × 2,406 occupancy-days). .   3,753     Fixed cost element. ........................................................ $1,395 2. Electrical costs may reflect seasonal factors other than just the  variation in occupancy days. For example, common areas such as  the reception area must be lighted for longer periods during the  winter than in the summer. This will result in seasonal fluctuations  in the fixed electrical costs. Additionally, the fixed costs will be  affected by the number of days in a month. In other words, costs 
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like the costs of lighting common areas are variable with respect to  the number of days in the month, but are fixed with respect to how  many rooms are occupied during the month. Other, less  systematic, factors may also affect electrical costs such as the  frugality of individual guests. Some guests will turn off lights when  they leave a room. Others will not.
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Brief Exercise 5-4  (30 minutes) 1. The Alpine House, Inc. Income Statement—Ski Department For the Quarter Ended March 31 Sales. ......................................................................... $150,000 Less variable expenses: Cost of goods sold (200 pairs* × $450 per pair). ..... $90,000 Selling expenses (200 pairs × $50 per pair). ........... 10,000 Administrative expenses (20% × $10,000). .............       2,000       102,000     Contribution margin. ................................................... 48,000
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This note was uploaded on 05/16/2010 for the course ACC MG taught by Professor Dr.leiter during the Spring '10 term at Andrew Jackson.

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Chapter 5 Solutions - Brief Exercise 51 (20 minutes) 1....

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