he refrigerator purchased 14 months ago. The unit was covered by a warranty for 12 months, during which time it worked perfectly. It conked out after 14 months, despite an original estimate that it would last five years. 4. The hotel has two options for obtaining fresh pies, cakes, and pastries. The goodies can be purchased from a local bakery for approximately $1,550 per month, or they can be made in the hotel’s kitchen. To make the pastries on the premises, the hotel will have to hire a part-time pastry chef. This will cost $500 per month. The cost of ingredients will amount to roughly $850 per month. Thus, the savings from making the goods in the hotel’s kitchen amount to $200 per month. 5. The cost of dishes broken by kitchen employees. ■ Problem 2–53 Fixed and Variable Costs; Forecasting (LO 2-7, 2-8) 20x5 Direct labor forecast: $4,290,000 ■ Problem 2–54 Cost Classifications; Hotel (LO 2-1, 2-3, 2-9, 2-10) hiL25664_ch02_034-077.indd 72 6/27/13 1:39 AM Chapter 2 Basic Cost Management Concepts 73 6. The cost of leasing a computer used for reservations, payroll, and general hotel accounting. 7. The cost of a pool service that cleans and maintains the hotel’s swimming pool. 8. The wages of the hotel’s maintenance employees, who spent nine hours (at $13.50 per hour) repairing the dishwasher in the kitchen. 9. The cost of general advertising by the hotel, which is allocated to the food and beverage department. 10. The cost of food used in the kitchen. 11. The difference in the total cost incurred by the hotel when one additional guest is registered. 12. The cost of space (depreciation) occupied by the kitchen. 13. The cost of space (depreciation) occupied by a sauna next to the pool. The space could otherwise have been used for a magazine and book store. 14. The profit that would have been earned in a magazine and book store, if the hotel had one. 15. The discount on room rates given as a special offer for a “Labor Day Getaway Special.”
Several costs incurred by Cape Cod Hotel and Restaurant are given in the following list. For each cost,
indicate which of the following classifications best describe the cost. More than one classification may
apply to the same cost item.
Cost Classifications
a. Direct cost of the food and beverage department
b. Indirect cost of the food and beverage department
c. Controllable by the kitchen manager
d. Uncontrollable by the kitchen manager
e. Controllable by the hotel general manager
f. Uncontrollable by the hotel general manager
g. Differential cost
h. Marginal cost
i. Opportunity cost
j. Sunk cost
k. Out-of-pocket cost
Cost Items
1. The wages earned by table-service personnel.
2. The salary of the kitchen manager.
3. The cost of the refrigerator purchased 14 months ago. The unit was covered by a warranty for
12 months, during which time it worked perfectly. It conked out after 14 months, despite an original estimate that it would last five years.
4. The hotel has two options for obtaining fresh pies, cakes, and pastries. The goodies can be purchased from a local bakery for approximately $1,550 per month, or they can be made in the hotel’s
kitchen. To make the pastries on the premises, the hotel will have to hire a part-time pastry chef.
This will cost $500 per month. The cost of ingredients will amount to roughly $850 per month.
Thus, the savings from making the goods in the hotel’s kitchen amount to $200 per month.
5. The cost of dishes broken by kitchen employees.
■ Problem 2–53
Fixed and Variable Costs;
(LO 2-7, 2-8)
20x5 Direct labor forecast:
$4,290,000
■ Problem 2–54
Cost Classifications; Hotel
(LO 2-1, 2-3, 2-9, 2-10)
hiL25664_ch02_034-077.indd 72 6/27/13 1:39 AM
Chapter 2 Basic Cost Management Concepts 73
6. The cost of leasing a computer used for reservations, payroll, and general hotel accounting.
7. The cost of a pool service that cleans and maintains the hotel’s swimming pool.
8. The wages of the hotel’s maintenance employees, who spent nine hours (at $13.50 per hour)
repairing the dishwasher in the kitchen.
9. The cost of general advertising by the hotel, which is allocated to the food and beverage
department.
10. The cost of food used in the kitchen.
11. The difference in the total cost incurred by the hotel when one additional guest is registered.
12. The cost of space (
13. The cost of space (depreciation) occupied by a sauna next to the pool. The space could otherwise
have been used for a magazine and book store.
14. The profit that would have been earned in a magazine and book store, if the hotel had one.
15. The discount on room rates given as a special offer for a “Labor Day Getaway Special.”
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