Karen has been working with a small travel agency for the past few years to learn the business and to better understand what costs are necessary to run it. Now, having been in the business world for a few years, she's ready to start her own travel agency, specializing in "off the grid" locations. She knows there will be both overhead costs and labor costs, since she intends to hire one assistant. The following chart outlines her estimates thus far. Annual net operating cash flows Initial asset investment Asset life in years Salvage value of asset at end of useful life Tax rate $3,800 $9,800 (a) 8 $1,000 25% * After assistant and overhead costs, but does not include a salary for Karen. As a new business owner, Karen only expects to earn a 5% rate of return. She conducted an initial NPV anlaysis for an 8-year interval, recognizing that she'll make some significant adjustments after that point. Her initial analysis revealed a positive NPV. Click here to view the factor table

Karen has been working with a small travel agency for the past few years to learn the business and to better understand what costs are necessary to run it. Now, having been in the business world for a few years, she's ready to start her own travel agency, specializing in "off the grid" locations. She knows there will be both overhead costs and labor costs, since she intends to hire one assistant. The following chart outlines her estimates thus far. Annual net operating cash flows Initial asset investment Asset life in years Salvage value of asset at end of useful life Tax rate $3,800 $9,800 (a) 8 $1,000 25% * After assistant and overhead costs, but does not include a salary for Karen. As a new business owner, Karen only expects to earn a 5% rate of return. She conducted an initial NPV anlaysis for an 8-year interval, recognizing that she'll make some significant adjustments after that point. Her initial analysis revealed a positive NPV. Click here to view the factor table

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 5CE: Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each...

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Karen has been working with a small travel agency for the past few years to learn the business and to better understand what costs are necessary to run it. Now, having been in the business world for a few years, she's ready to start her own travel agency, specializing in "off the grid" locations. She knows there will be both overhead costs and labor costs, since she intends to hire one assistant. The following chart outlines her estimates thus far. Annual net operating cash flows³ Initial asset investment Asset life in years $3,800 $9,800 8 Salvage value of asset at end of useful life $1,000 Tax rate 25% a After assistant and overhead costs, but does not include a salary for Karen. As a new business owner, Karen only expects to earn a 5% rate of return. She conducted an initial NPV anlaysis for an 8-year interval, recognizing that she'll make some significant adjustments after that point. Her initial analysis revealed a positive NPV. Click here to view the factor table (a) Rerun the…
Olga was planning to set up a business where she would purchase paintings for $1,050 per unit and sell them for $1,800 per unit. She wanted to conduct a break-even analysis and identified the following costs for running her business: $4,470.00 per month for store leasing, $54 per month website hosting fee, $5,150 per month for staff salary, $2,040 per month for advertising costs, and $25 per unit for labour charges to pack the paintings. a. How many paintings would she have to sell per month to break-even? Round up to the next whole number b. If she wants to make a profit of $24,000 in a month, how many paintings would she have to sell? Round up to the next whole number
Janice Huffman has decided to start Rundle Cleaning, a residential housecleaning service company. She is able to rent cleaning equipment at a cost of $760 per month. Labor costs are expected to be $90 per house cleaned and supplies are expected to cost $6 per house. Required a. Determine the total expected cost of equipment rental and the average expected cost of equipment rental per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of equipment a fixed or a variable cost? b. Determine the total expected cost of labor and the average expected cost of labor per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of labor a fixed or a variable cost? c. Determine the total expected cost of supplies and the average expected cost of supplies per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of supplies a fixed or a variable cost? d.…
Janice Huffman has decided to start Rundle Cleaning, a residential housecleaning service company. She is able to rent cleaning equipment at a cost of $760 per month. Labor costs are expected to be $90 per house cleaned and supplies are expected to cost $6 per house. Required a. Determine the total expected cost of equipment rental and the average expected cost of equipment rental per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of equipment a fixed or a variable cost? b. Determine the total expected cost of labor and the average expected cost of labor per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of labor a fixed or a variable cost? c. Determine the total expected cost of supplies and the average expected cost of supplies per house cleaned, assuming that Rundle Cleaning cleans 20, 30, or 40 houses during one month. Is the cost of supplies a fixed or a variable cost? d.…
Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Required: 1. Calculate the prime cost per cleaning. 2. Calculate the conversion cost per cleaning. 3. Calculate the total variable cost per cleaning. 4. Calculate the total service cost per cleaning. 5. What if rent on the office that Jean and Tom use to run HHH increased by 1,500? Explain the impact on the following: a. Prime cost per cleaning b. Conversion cost per cleaning c. Total variable cost per cleaning d. Total service cost per cleaning
Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufacturessophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which isprivately owned, has approached a bank for a loan to help it finance its growth. The bank requires financialstatements before approving such a loan. You have been asked to help prepare the financial statements andwere given the following list of costs:1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory employees.11. Depreciation on chairs…
Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week.The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Wildhorse that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination from the supplier to Natalie.) Assume that Natalie has now decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory.Inventory as on January 31, 2023 represents three mixer purchased at a unit cost of $776.The following transactions occur in February to May 2023. Feb. 2 Natalie buys two mixers on account from Wildhorse Supply Co. for $1,560 ($780 each), FOB destination, terms n/30. 16 She sells one mixer for $1,495 cash. 25 She pays the amount owed to Wildhorse. Mar.…
Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week.The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Wildhorse that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination from the supplier to Natalie.) Assume that Natalie has now decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory.Inventory as on January 31, 2023 represents three mixer purchased at a unit cost of $776.The following transactions occur in February to May 2023. Feb. 2 Natalie buys two mixers on account from Wildhorse Supply Co. for $1,560 ($780 each), FOB destination, terms n/30. 16 She sells one mixer for $1,495 cash. 25 She pays the amount owed to Wildhorse. Mar.…
At Aspen Trucking Company, the average driver out of its 200 driver employees travels 1,600 miles per week (50 weeks per year) and it charges customers $2.15 per mile. Aspen provides each driver a $95,000 big rig and pays the driver $0.58 per mile. It estimates that the direct cost, other than the driver, for operating a truck is $0.75 per mile. Jack, the sales manager has been working on several ways to grow the revenue of the business by 10%. Since he has had to turn away business, Jack has now decided that the best way to do that is a combination of adding drivers and equipment along with a price increase of 2.5% next year. He knows that a first time driver will only be 75% productive in his or her first year and it will cost $5,500 to recruit each one. Assuming he can get all needed drivers hired by the first working day of the year, what will Aspen’s first year approximate cash flow be from this growth initiative? Please solve with excel. Group of answer choices a. $8,500 b.…
Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $10,780. The booth will be open 22 hours during the trade show. Ms. Ortega also plans to add a new product line, ProOffice, which will cost $180 per package. She will continue to sell the existing product, EZRecords, which costs $94 per package. Ms. Ortega believes that the salesperson will spend approximately 12 hours selling EZRecords and 10 hours marketing ProOffice. Required a. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 78 units of EZRecords and 59 units of ProOffice. b. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 205 units of EZRecords and 110 units of ProOffice. Note: For all requirements, round "Cost per unit" to 2 decimal…
Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $10,660. The booth will be open 26 hours during the trade show. Ms. Ortega also plans to add a new product line, ProOffice, which will cost $190 per package. She will continue to sell the existing product, EZRecords, which costs $103 per package. Ms. Ortega believes that the salesperson will spend approximately 16 hours selling EZRecords and 10 hours marketing ProOffice. Required a. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 73 units of EZRecords and 59 units of ProOffice.
Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week.The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination). Assume that Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory.Inventory as on January 31, 2019 represents three deluxe mixer purchased at a unit cost of $595.The following transactions occur in February to May 2019. Feb. 2 Natalie buys two deluxe mixers on account from Kzinski Supply Co. for $1,200 ($600 each), FOB destination, terms n/30. 16 She sells one deluxe mixer for $1,150 cash. 25 She pays the amount owed to Kzinski. Mar. 2 She buys one deluxe…