Manufacturing Data: Number Total Canoe Number Total Paddle Manufacturing of Paddles Manufactured of Canoes Manufacturing Year Manufactured Costs Year Costs 20X9 250 $103,000 20X9 900 $38,500 20X8 275 128,000 20X8 1,200 49,000 20X7 240 108,000 20X7 1,000 44,000 20X6 310 114,000 20X6 1,100 45,500 20X5 350 141,500 20XS 1,400 52,000 20X4 400 140,000 20X4 1,700 66,500 390 Copyright 2018 Cengage Learning. All Rights Reserved. May not be copled, scanned, or duplicated, in whole or in part. WCN 02-200-203 Making the Connection Cost Behavior and Cost-Volume-Profit Analysis for Many Glacier Hotel 391 Marketing Data: Total Paddle Marketing Costs Total Canoe Number of Marketing Number of Year Canoes Sold Costs Year Paddles Sold 20X9 250 $45,000 20X9 900 $ 7,500 20X8 9,000 8,000 20X8 275 43,000 1,200 44,000 51,000 20X7 240 20X7 1,000 20X6 310 20X6 1,100 8,500 20X5 350 62,000 20X5 1,400 10,000 20X4 400 60,000 20X4 1,700 11,500
Using the High-Low Method to Estimate Variable and
Fixed Costs
Located on Swiftcurrent Lake in Glacier National Park, Many Glacier Hotel was built in
1915 by the Great Northern Railway. In an effort to supplement its lodging revenue, the hotel
decided in 20X1 to begin manufacturing and selling small wooden canoes decorated with
symbols hand painted by Native Americans living near the park. Due to the great success of
the canoes, the hotel began manufacturing and selling paddles as well in 20X3. Many hotel
guests purchase a canoe and paddles for use in self-guided tours of Swiftcurrent Lake. Because
production of the two products began in different years, the canoes and paddles are produced
in separate production facilities and employ different laborers. Each canoe sells for $500, and
each paddle sells for $50. A 20X3 fire destroyed the hotel’s accounting records. However, a
new system put into place before the 20X4 season provides the following aggregated data for
the hotel’s canoe and paddle manufacturing and marketing activities:
Sensitivity Cost-Volume-Profit Analysis and Production Versus Period Costs, MultipleProduct Setting
If both the variable and fixed production costs (refer to your answer to Requirement 1)
associated with the canoe product line increased by 5% (beyond the estimate from the
high-low analysis), how many canoes and paddles would need to be sold in order to earn
a target income of $96,000? Assume the same sales mix and additional fixed costs as in
Requirement 3.
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