chapter06_problem

# Chapter06_problem - Introduction to Managerial Accounting Canadian Edition by Garrison Noreen Kalagnanam and Vaidyanathan Alternate Problems-Set A

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Introduction to Managerial Accounting, Canadian Edition, by Garrison, Noreen, Kalagnanam, and Vaidyanathan Alternate Problems-Set A, Chapter 6 PROBLEM 6-1A High-Low Method and Predicting Cost (LO1, LO2) CHECK FIGURE (1) \$456,000 per month plus \$2.00 per bed-day St. Mark’s Hospital contains 800 beds. The average occupancy rate is 95% per month. In other words, an average of 95% of the hospital’s beds is occupied by patients. At this level of occupancy, the hospital’s operating costs are \$22 per occupied bed per day, assuming a 30-day month. This \$22 cost contains both variable and fixed cost elements. During April, the hospital’s occupancy rate was only 85%. A total of \$496,800 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. b. The total fixed operating costs per month. 2. Assume an occupancy rate of 90% per month. What amount of total operating cost would you expect the hospital to incur? 1

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Introduction to Managerial Accounting, Canadian Edition, by Garrison, Noreen, Kalagnanam, and Vaidyanathan Alternate Problems-Set A, Chapter 6 PROBLEM 6-2A Contribution Format Income Statement (LO5) CHECK FIGURE (1) Net income is \$1,400 Marwick’s Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, \$125 each from the manufacturer. Marwick’s Pianos, Inc., sells the pianos to its customers at an average price of \$250 each. The selling and administrative costs that the company incurs in a typical month are presented below: Costs Cost Formula Selling: Advertising \$800 per month Sales salaries and commissions \$1,200 per month, plus 10% of sales Delivery of pianos to customers \$15 per piano sold Utilities \$500 per month Depreciation of sales facilities \$750 per month Administrative: Executive salaries \$2,000 per month Insurance \$250 per month Clerical \$700 per month, plus \$5 per piano sold Depreciation of office equipment \$400 per month During June, Marwick’s Pianos, Inc., sold and delivered 100 pianos. Required: 1. Prepare an income statement for Marwick’s Pianos, Inc., for June. Use the traditional format, with costs organized by function. 2. Redo (1) above, this time using the contribution format, with costs organized by behavior. Show costs and revenues on both total and a per unit basis down through contribution margin. 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? 2
Introduction to Managerial Accounting, Canadian Edition, by Garrison, Noreen, Kalagnanam, and Vaidyanathan Alternate Problems-Set A, Chapter 6 PROBLEM 6-3A Scattergraph Analysis (LO3) CHECK FIGURE none Molina Company is a value-added computer reseller that specializes in providing services to small companies. The company owns and maintains several autos for use by the sales staff. All expenses of operating these autos have

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## This note was uploaded on 04/30/2011 for the course ACCOUNTING 200 taught by Professor Levine during the Spring '11 term at DeVry San Diego.

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Chapter06_problem - Introduction to Managerial Accounting Canadian Edition by Garrison Noreen Kalagnanam and Vaidyanathan Alternate Problems-Set A

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