DB Week 6, Schultz

# DB Week 6, Schultz - 04/14/2011 BUS5431 Managerial...

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04/14/2011 BUS5431 Managerial Accounting Week 6 Homework Chapter 7 Exercise 6 a. The incremental profit is \$430 as follows: Revenue \$70 x 175 \$ 12,250 Less cost of unprepared food and beverage \$35 x 175 (Food) 6,125 \$13 x 175 (Beverage) 2,275 3,850 Lost revenue \$54 x 190 (10,260) Cost savings for food and beverage \$20 x 190 (Food) 3,800 \$16 x 190 (Beverage) 3,040 Loss profit ( 3,420) Net \$ 430 b.As indicated above, the opportunity cost of accepting the New England Investments group is \$3,420. c. The restaurant should consider the fact that it may hurt its business with “regulars” who are turned away due to the closure. This could have serious long-term effects. Exercise 8 Cost of Making Cost of Buying Incremental 1,000 Valves 1,000 Valves Cost (Savings) Variable costs Material \$ 900,000 -0-(\$ 900,000) Labor 600,000 -0- (600,000) Variable OH 300,000 -0 - (300,000) 1,800,000 -0 - (1,800,000 ) Fixed costs Depr. building 200,000 200,000 -0- Depr. equip. 500,000 500,000 -0- Sup. salaries 300,000 -0- (300,000) 1,000,000 700,000 (300,000 )

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Other Cost savings on leased space -0- (55,000) (55,000) Cost of buying valves -0 - 2,000,000 2,000,000 -0- 1,945,000 2,155,000 Total \$2,800,000 \$2,645,000 \$ (155,000 ) The company should buy the valves—the incremental cost of making them is \$155,000. Exercise 13 Income Without Home Office Furniture Sales \$1,356,000 Less cost of sales 791,000 Contribution margin 565,000 Less direct fixed costs: Salaries 175,000 Other 60,000 Less allocated fixed costs Rent 24,000 Insurance 6,000 Cleaning
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## This note was uploaded on 05/15/2011 for the course BUS 5541 taught by Professor Collins during the Spring '11 term at FIT.

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DB Week 6, Schultz - 04/14/2011 BUS5431 Managerial...

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