PROBLEM 5-26 CVP Applications; Break-Even Analysis; Graphing LOS-1, LO5-2, LO5-4, LO5-5The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles ofshoes that are all sold at the same price. Sales personnel in the shops are paid a sales commissionon each pair of shoes sold plus a small base salary.The following data pertains to Shop 48 and is typical of the company's many outlets:1.2.4.5.Selling price..Variable expenses:Invoice costSales commissionTotal variable expenses.6.Fixed expenses:AdvertisingRent..SalariesTotal fixed expenses.Per Pair ofShoes$30.00Required:What is Shop 48's annual break-even point in unit sales and dollar sales?Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000pairs of shoes sold each year. Clearly indicate the break-even point on the graph.3.If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income(loss)?The company is considering paying the Shop 48 store manager an incentive commission of75 cents per pair of shoes (in addition to the salesperson's commission). If this change ismade, what will be the new break-even point in unit sales and dollar sales?Refer to the original data. As an alternative to (4) above, the company is considering payingthe Shop 48 store manager 50 cents commission on each pair of shoes sold in excess of thebreak-even point. If this change is made, what will be Shop 48's net operating income (loss) if15,000 pairs of shoes are sold?Refer to the original data. The company is considering eliminating sales commissions entirelyin its shops and increasing fixed salaries by $31,500 annually. If this change is made, whatwill be Shop 48's new break-even point in unit sales and dollar sales? Would you recommendthat the change be made? Explain.$13.504.50$18.00Annual$ 30,00020,000100,000$150,000

Break Even Point (BEP) :— That is the point at which total cost and total revenue are equal. The…

PROBLEM 5-26 CVP Applications; Break-Even Analysis; Graphing LO5-1, LO5-2, LO5-4, LO5-5 The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Selling price. Variable expenses: Invoice cost.. Sales commission Total variable expenses. 1. 2. Fixed expenses: Advertising.. Rent...... Salaries.... Total fixed expenses... **** Per Pair of Shoes $30.00 $13.50 4.50 $18.00 Annual $ 30,000 20,000 100,000 $150,000 Required: What is Shop 48's annual break-even point in unit sales and dollar sales? Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph. 3. If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income (loss)?

PROBLEM 5-26 CVP Applications; Break-Even Analysis; Graphing LO5-1, LO5-2, LO5-4, LO5-5 The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Selling price. Variable expenses: Invoice cost.. Sales commission Total variable expenses. 1. 2. Fixed expenses: Advertising.. Rent...... Salaries.... Total fixed expenses... **** Per Pair of Shoes $30.00 $13.50 4.50 $18.00 Annual $ 30,000 20,000 100,000 $150,000 Required: What is Shop 48's annual break-even point in unit sales and dollar sales? Prepare a CVP graph showing cost and revenue data for Shop 48 from zero shoes up to 17,000 pairs of shoes sold each year. Clearly indicate the break-even point on the graph. 3. If 12,000 pairs of shoes are sold in a year, what would be Shop 48's net operating income (loss)?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 11E: Assign the customer-related activity costs to each customer type using activity rates. Now calculate...

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3-43 CVP analysis, shoe stores. The HighStep Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men's shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. HighStep is considering opening another store that is expected to have the revenue and cost relationships shown here. View Review Data Formulas Home Page Layout Insert C D E В A Annual Fixed Costs Unit Variable Data (per pair of shoes) 1 $60.00 Rent $ 30,000 2 Selling price $37.00 Salaries 3 Cost of shoes Sales commission 100,000 Advertising Other fixed costs 3.00 40,000 $40.00 5 Variable cost per unit 10,000 Total fixed costs $180,000 6 Consider each question independently. 1. What is the annual breakeven point in (a) units sold and (b) revenues? 2. If 8,000 units are sold, what will be the store's operating income (loss)? 3. If…
Required information Problem 5-26 (Algo) CVP Applications; Break-Even Analysis; Graphing [LO5-1, LO5-2, LO5-4, LO5-5] [The following information applies to the questions displayed below.] The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Selling price Variable expenses: Invoice cost Sales commission Total variable expenses Per Pair of Shoes $ 40.00 $ 16.00 4.00 $ 20.00 Fixed expenses: Advertising Rent Salaries Total fixed expenses Annual $ 45,000 31,000 155,000 $ 231,000 Problem 5-26 (Algo) Part 5 5. Refer to the original data. As an alternative to (4) above, the company is considering paying the Shop 48 store manager 55 cents commission on each pair of shoes sold in excess of the break-even point. If this change…
Required information Problem 5-68 (Static) Cost Estimation: Simple and Multiple Regression Using a Spreadsheet (Appendix A) (LO 5-4, 5, 6, 9) [The following information applies to the questions displayed below.] Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. During a discussion, one of the managers suggests that number of employees might be better at explaining cost than store revenues. As a result of that suggestion, managers collected the following information from last year's operations (revenues and costs in thousands of dollars): Costs Employees 101$ 4,214 102 2,894 103 5, 181 104 3,998 105 3,676 106 107 108 109 110 2,959 111 4,179 112 113 Store 114 115 3, 319 5, 029 2,374 4, 688 3, 200 2,556 4, 655 2,986 39$ 29 47 38 33…
15 2731 Required information [The following information applies to the questions displayed below] The Fashion Shoe Company operates a chain of women's shoe shops that carry many styles of shoes that are all sold at the same price. Sales personnel in the shops are paid a sales commission on each pair of shoes sold plus a small base salary. The following data pertains to Shop 48 and is typical of the company's many outlets: Per Pair of Shoes $40.00 Selling price Variable expenses: Invoice cost Sales commission Total variable expenses Fixed expenses Advertising mont Salaries Total fixed expenses $ 16.00 4.00 $ 20.00 Annual 45,000 31,000 155,000 $ 231,000-
Knowledge Check 01 Match the term and the definition. 1. Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n). of selling a tour package. is a cost that is incurred to support a number of cost objects but cannot be 2 A traced to them individually 3. Adventure Holiday sells thousands of tour packages each month through its various branches A branch manager's salary would be a(n) of the branch
Problem 10-59 (Algo) Customer Profitability (LO 10-4) Carmel Company has a frequent buyer program for its customers, where the customers can attain an “elite” level based on the number of orders and the total revenue of the orders. There are two elite levels: Platinum and Titanium. The benefits of elite membership include discounts and access to special customer service representatives who can resolve problems. The company has one full-time customer representative per 200 Titanium customers and one full-time customer representative per 2,000 Platinum customers. Customer representatives receive salaries plus bonuses of 1 percent of customer gross margin. Carmel spends 90 percent of its promotion costs on Titanium customers to encourage their loyalty. Customer Costs Total Titanium Platinum Number of customers 34,000 8,000 26,000 Average customer representative salary $ 71,000 $ 71,000 Promotion costs $ 3,150,000 Average gross margin per…
Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Opening and closing accounts $300,000 Issuing monthly statements 450,000 Processing transactions 3,075,000 Customer inquiries 600,000 Providing automatic teller machine (ATM) services 1,680,000 Total cost $6,105,000 Additional data concerning the usage of the activities by the various customers are also provided: Account Balance Low Medium High Number of accounts opened/closed 22,500 4,500 3,000 Number of statements issued 675,000 150,000 75,000 Processing transactions 27,000,000 3,000,000 750,000 Number of telephone minutes 1,500,000 900,000 600,000 Number of ATM transactions 2,025,000…
LO 1, 2, 3, 5, 6 6-27 Customer profitability analysis, original activity-based costing Kronecker Company, a growing mail-order clothing and accessory company, is concerned about its growing MSDA expenses. It therefore examined its customer ordering patterns for the past year and identified four different types of customers, as illustrated in the following table. Kronecker sends catalogs and flyers to all its customers several times a year. Orders are taken by mail or over the phone. Kronecker maintains a toll-free number for customers to use when placing orders over the phone. Kronecker prides itself on the personal attention it provides shoppers who order over the phone. All purchases are paid for by check or credit card. Kronecker has a very generous return policy if customers are not satisfied with the merchandise received. Customers must pay return shipping charges, but their purchase price is then fully refunded. CUSTOMER TYPE 1 CUSTOMER TYrE 2 CUSTCMER TYrE 3 CUSTOMER TYPE 4…
Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Additional data concerning the usage of the activities by the various customers are also provided: Required: (Note: Round answers to two decimal places.) 1. Calculate a cost per account per year by dividing the total cost of processing and maintaining checking accounts by the total number of accounts. What is the average fee per month that the bank should charge to cover the costs incurred because of checking accounts? 2. Calculate a cost per account by customer category by using activity rates. 3. Currently, the bank offers free checking to all of its customers. The interest revenues average 90 per account; however, the interest revenues earned per account by category are 80, 100, and 165 for the low-, medium-, and high-balance accounts, respectively. Calculate the average profit per account (average revenue minus average cost from Requirement 1). Then calculate the profit per account by using the revenue per customer type and the unit cost per customer type calculated in Requirement 2. 4. CONCEPTUAL CONNECTION After the analysis in Requirement 3, a vice president recommended eliminating the free checking feature for low-balance customers. The bank president expressed reluctance to do so, arguing that the low-balance customers more than made up for the loss through cross-sales. He presented a survey that showed that 50% of the customers would switch banks if a checking fee were imposed. Explain how you could verify the presidents argument by using ABC.
View Policies Current Attempt in Progress E-Flix rents DVDS that are mailed out to customers upon demand. E-Flix has identified three activities involved in getting the videos to its customers. Information on those activities for the month of July follows: Estimated Expected Use of Cost Drivers Cost Pools Cost Drivers Overhead Cost Order taking costs Number of orders $20,592 187,200 orders Technology support Number of minutes $11,700 234,000 minutes Picking and shipping Number of DVDS $39,624 330,200 DVDS costs During July, the Tucker family placed 17 orders consisting of 21 DVDs. Tucker required 7 minutes of tech support. Customers pay $9.00 per month to rent unlimited DVDS. Using ABC, how much overhead is applied to the Tucker family account for order taking costs? O $4.74 O $2.52 O $1.871 O $6.45 Submit Answer Save for Later Attempts: 0 of 1 used 2:27 PM 10/13/20 e
Problem 1. Mahinahon Company would like to institute an activity-based costing system to price products. The company's Purchasing Department incurs costs of P550,000 per year and has six employees. Purchasing has determined the three major activities that occur during the year. Activity Allocation Measure # of People Total Cost Issuing purchase orders # of purchase orders 1 P285,000 Reviewing receiving reports # of receiving reports 2 P190,000 Making phone calls # of phone calls 3 P220,000 During the year, 50,000 phone calls were made in the department; 15,000 purchase orders were issued; and 10,000 shipments were received. Product A required 200 phone calls, 150 receiving reports, and 50 purchase orders. Product B required 350 phone calls, 400 receiving reports, and 100 purchase orders. 1Determine the amount of purchasing department cost that should be assigned to each of these products. 1.2. Determine purchasing department cost per…
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