A local restaurateur, Cho Senn, is considering three options for his new Asian fusionrestaurant. Option A - called Midtown - will have annual fixed costs of $40,000 andvariable costs of $3.50 per customer. Option B - called Market - will have annualfixed costs of $29,500 and variable costs of $4.05 per customer. Finally Option C-called Mall - has annual fixed cost of $17,500 and variable costs of $5.00 percustomer. At what volumes are the costs of Option A and Option B the same?Your Answer:Answer

The question is related to Indifference Point. It is that level of output at which total cost under…

Answered: A local restaurateur, Cho Senn, is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Skip Consulting helped Schmidt Roofers put various cost saving techniques into place. Thecontract specifies that Skip will receive a flat fee of $70,000 and an additional $19,000 if Schmidtattains a target amount of cost savings. Skip estimates a 20% chance that Schmidt will reach thetarget for cost savings. Assuming that Skip uses the expected-value approach, what is thetransaction price for this product?a. $19,000b. $70,000c. $73,800d. $89,000
?
Mesa Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell this slicer through its online website. Given market research, Mesa believes that it can charge $20 for the Slim Slicer. Prototypes of the Slim Slicer, however, are costing $22. By using cheaper materials and gaining efficiencies in mass production, Mesa believes it can reduce Slim Slicer's cost substantially. Mesa wishes to earn a return of 40% of the selling price. (b) When is target costing particularly helpful in deciding whether to produce a given product?
The manager of a car wash must decide whether to have one or two wash lines. One line will mean a fixed cost of $5,600 a month, and two lines will mean a fixed cost of $9,520 a month. Each line would be able to process 15 cars an hour. Variable costs will be $3 per car, and revenue will be $5.95 per car. The manager projects an average demand of between 14 and 18 cars an hour. Would you recommend one or two lines? The car wash is open 280 hours a month.. Choose line
Radar Company sells bikes for $500 each. The company currently sells 4,150 bikes per year and could make as many as 4,510 bikes per year. The bikes cost $300 each to make: $180 in variable costs per bike and $120 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 360 bikes for $460 each. Incremental fixed costs to make this order are $70 per bike. No other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Sales Variable costs Contribution margin Income (b) The company should $ Per Unit Total 460 $ 165,600 180 0
Radar Company sells bikes for $520 each. The company currently sells 4,350 bikes per year and could make as many as 4,690 bikes per year. The bikes cost $270 each to make: $160 in variable costs per bike and $110 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 340 bikes for $500 each. Incremental fixed costs to make this order are $70 per bike. No other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Contribution margin Income: (b) The company should Per Unit 0 Total
Kate figures that based on her target ROS she will have to sell 20, 500 units of PickleKeeper, a storage unit for cucumbers. Kate sells the product direct to consumers for $0.59 and spends $ 0.29 per unit to manufacture and sell it. With fixed costs of $5,000, her target ROS % must be around 9.5%. (Round your answer to the nearest 50 units when choosing an option from below). Question 1 options: True False
Meman
Radar Company sells bikes for $490 each. The company currently sells 4,150 bikes per year and could make as many as 4,490 bikes per year. The bikes cost $300 each to make: $175 in variable costs per bike and $125 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 340 bikes for $470 each. Incremental fixed costs to make this order are $60 per bike. No other costs will change if this order is accepted. (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Per Unit Total Contribution margin Income (b) The company should
Smith Builders builds 1,500-square-foot starter tract homes in the fast-growing suburbs of Atlanta. Land and labor are cheap, and competition among developers is fierce. The homes are a standard model, with any upgrades added by the buyer after the sale. Smith Builders' costs per developed sublot are as follows: 1(Click the icon to view the costs.) Smith Builders would like to earn a profit of 14% of the variable cost of each home sold. Similar homes offered by competing builders sell for $206,000 each. Assume the company has no fixed costs. Read the requirements2. Requirement 1. Which approach to pricing should Smith Builders emphasize? Why? Smith Builders will need to emphasize a target-costing approach to pricing because they are price-takers. This means Smith will not have much control over pricing because the tract homes are not unique and face stiff competition. Requirement 2. Will Smith Builders be able to achieve…

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