PA2. LO 12.1 Stork Enterprises delivers care packages for special occasions. They charge $45 for a small package, and $80 for a large package. The sales tax rate is 6%. During the month of May, Stork delivers 38 small packages and 22 large packages. A. What is the total tax charged to the customer per small package? What is the overall charge per small package? B. What is the total tax charged to the customer per large package? What is the overall charge per large package? C. How much sales tax liability does Stork Enterprises have for the month of May? D. What account is used to recognize this tax situation for the month of May? E. When Stork remits payment to the sales tax governing body, what happens to the sales tax liability?
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Given,
Charge for small package = $45
Charge for large package = $80
Sales tax = 6%
Small packages delivered = 38
Large packages delivered = 22
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