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Unformatted text preview: 03/13/2011 BUS5431 Managerial Accounting Week 1 Homework Chapter 1 Exercise 14 The opportunity cost of not working Saturday is 1,000 per Saturday not open. This is derived by the 2,500 in revenue minus 1,500 in operating expenses related to being open Saturday. Rent and depreciation are not considered in this equation because they are already expensed and those amounts do not increase in relation to being open an additional day. Problem 2 a. Incremental cost = 64,000 based upon the variable cost for 25,000 units (20,000 +12,000) * 2. b. Incremental revenue = 230,000 which is the additional jars sold at the new price (50,000 * 4.60). c. Yes, reducing price and increasing sales would yield a net revenue increase of 166,000 (230,000 64,000). Problem 4 a. I would investigate both expense accounts. COGS is budgeted at 50% however COGS saw over a 20% increase while sales only went up 10%. I would also look into why salaries were 10% higher too. I would want to see if these salary overages were caused by special sales or was the store just overstaffed...
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