Black's Compact Disk Store expanded the size of its store in Mandaluyong Cty, two months ago. The owner, Manuel Black, has asked you to analyze the cost structure in his store, as a basis for assessing the profitability of his business. He provides you with account data for the most recent month, which he explains is representative of what these costs are in most months of the year; there is not much seasonality in his business. Last month 8,900 compact disks were sold. Account Amount Salespersons' wages Compact disk purchases Rent P17,800 66,750 10,250 400 Depreciation Shopping bags Insurance Advertising Utilities Black's salary 180 750 650 1,250 18 500
Black's Compact Disk Store expanded the size of its store in Mandaluyong Cty, two months ago. The owner, Manuel Black, has asked you to analyze the cost structure in his store, as a basis for assessing the profitability of his business. He provides you with account data for the most recent month, which he explains is representative of what these costs are in most months of the year; there is not much seasonality in his business. Last month 8,900 compact disks were sold. Account Amount Salespersons' wages Compact disk purchases Rent P17,800 66,750 10,250 400 Depreciation Shopping bags Insurance Advertising Utilities Black's salary 180 750 650 1,250 18 500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Exercise 2 (Cost Estimation; Account Classification)
Black's Compact Disk Store expanded the size of its store in Mandaluyong
City, two months ago. The owner. Manuel Black, has asked you to analyze
the cost structure in his store, as a basis for assessing the profitability of his
business. He provides you with account data for the most recent month,
wnch he explains is representative of what these costs are in most months of
the year; there is not much seasonality in his business. Last month 8,900
compact disks were sold.
Атоunt
Ассоunt
Salespersons' wages
Compact disk purchases
Rent
P17,800
66,750
10,250
400
Depreciation
Shopping bags
Insurance
180
750
Advertising
Utilities
Black's salary
650
1,250
18,500

Transcribed Image Text:83
Cost Behavior: Analysis and Use
1. Develop the cost equation for Black's store, using the account
Assume that salespersons' wages are based on commissions only.. Also,
assume that Black purchases promptly on a day-to-day basis to replace
inventory so that the level of inventory remains constant.
Required:
classification method, assuming that the cost object is the individual
compact disk.
2. Black plans to increase sales by 25 percent next month by reducing the
price of his compact disks. Assuming a 25 percent increase in sales
units, what is the lowest price Black can sell his disks for if he wants to
meet all costs plus make PP10 profit per disk?
3. What would the profit per disk be if sales actually increased by only 15
percent and the disks were sold at the price calculated in requirement 2?
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