Chapter 5 Presentation Solutions - 2009

Chapter 5 Presentation Solutions - 2009 -...

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Chapter 5 Presentation Solutions Brief Exercise 5-1 1. Cups of Coffee Served  in a Week 1,800 1,900 2,000 Fixed cost. ........................................... $1,100 $1,100 $1,100 Variable cost. ......................................         468             494             520     Total cost. ............................................ $1,568 $1,594 $1,620 Cost per cup of coffee served *. .......... $0.871 $0.839 $0.810 * 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 5-2 1. The completed scattergraph is presented below: ACC 208 Presentation Solutions Chapter #5 1
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2. Note:Answers will vary considerably due to the inherent imprecision and subjectivity  of the quick-and-dirty scattergraph method of estimating variable and fixed costs.  The approximate monthly fixed cost is $6,000—the point where the straight line  intersects the cost axis.  The variable cost per unit processed can be estimated as follows using the 8,000- unit level of activity, which falls on the straight line: Total cost at the 8,000-unit level of activity. ........................... $14,000 Less fixed costs. .....................................................................       6,000     Variable costs at the 8,000-unit level of activity. .................... $ 8,000 $8,000 ÷ 8,000 units = $1 per unit. Observe from the scattergraph that if the company used the high-low method to  determine the slope of the line, the line would be too steep. This would result in  underestimating the fixed cost and overestimating the variable cost per unit. Brief Exercise 5-4 ACC 208 Presentation Solutions Chapter #5 2
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1. The Haaki Shop, Inc. Income Statement—Surfboard Department For the Quarter Ended May 31 Sales. .................................................................................. $800,000 Variable expenses: Cost of goods sold  ($150 per surfboard × 2,000 surfboards*). ................... $300,000 Selling expenses  ($50 per surfboard × 2,000 surfboards). ...................... 100,000 Administrative expenses (25% × $160,000). ...................       40,000       440,000     Contribution margin. ............................................................ 360,000 Fixed expenses: Selling expenses. ............................................................. 150,000 Administrative expenses. .................................................   120,000       270,000     Net operating income. ......................................................... $      90,000    
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Chapter 5 Presentation Solutions - 2009 -...

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