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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

FINANCIAL ACCOUNTING
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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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: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
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?
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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