COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 3, Problem 3.44P
CVP analysis, shoe stores (continuation of 3-43). Refer to requirement 3 of Problem 3-43. In this problem, assume the role of the owner of HighStep.
- 1. As owner, which sales compensation plan would you choose if
forecasted annual sales of the new store were at least 10,000 units? What do you think of the motivational aspect of your chosen compensation plan?
Required
- 2. Suppose the target operating income is $69,000. How many units must be sold to reach the target operating income under (a) the original salary-plus-commissions plan and (b) the higher-fixed-salaries-only plan? Which method would you prefer? Explain briefly.
- 3. You open the new store on January 1, 2017, with the original salary-plus-commission compensation plan in place. Because you expect the cost of the shoes to rise due to inflation, you place a firm bulk order for 11,000 shoes and lock in the $37 price per unit. But toward the end of the year, only 9,500 shoes are sold, and you authorize a markdown of the remaining inventory to $50 per unit. Finally, all units are sold. Salespeople, as usual, get paid a commission of 5% of revenues. What is the annual operating income for the store?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
H1
1) Your delivery business uses a rental truck, In an attempt to estimate future truck rental costs
you have collected the following information:
Month
Miles driven
Rental cost of truck
January
February
600
$585
620
588
March
580
574
April
640
591
May
700
610
June
680
598
If you drive the truck 640 miles in July, what should the total rental cost be? Use the
high/low method.
Do you think this is a decent estimate of what the cost will be? Why?
F1.
Use the Panera annual report to answer this question. You are going to start a fast casual restaurant similar to Panera, You need to figure out what your cost of goods sold will be. You decide to use the 2012 Panera numbers for your assumed cost of goods sold. In particular, you use the "Cost of Food and Paper Products" line item as the basis of your cost of goods sold. You know to compare this to the revenue item "Bakery Cafe Sales, Net". Based on this, what would be a reasonable assumption for your cost of goods sold as a percentage of sales?
Chapter 3 Solutions
COST ACCOUNTING
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Required Information [The following information applies to the questions dlisplayed below.] Angle Silva has recently opened The Sandal Shop in Brisbane. Australla, a store that specializes In fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store: Sales price per pair of sandals Variable expenses per pair of sandals Contribution margin per pair of sandals $ 26 13 $ 13 Fixed expenses per year: Building rental Equipment depreciation Selling Administrative $ 3,900 6,500 3,900 11,700 Total fixed expenses $ 26,000 3. Angle has decided that she must earn a profit of $19.500 the first year to Justify her time and effort. How many palrs of sandals must be sold to attain this target profit? Unit sales to attain target profit pairsarrow_forwardIdentify the activity ratio of a computer shop is its Cost of Goods Sold is P12 million and the Average Inventory is P24 million.Show your solution, analyze and interpret your answer. Compute the return on asset of AR Grocery Store if the net profit after taxes is P10 million and its total assets is P100 million. Analyze and interpret your answer.arrow_forwardGive typing answer with explanation and conclusion 1. Discuss your reaction for the following mental accounting scenarios Question 3—Part A: Suppose that you've taken half a day off work to shop for a new, ride-on lawn mower. You have a big yard, and trimming it with your current, push-propelled mower simply takes too long. You have been eyeing the Model A300, which offers all the features you require at a cost of $2,000. As luck would have it, you won $500 the previous evening playing bingo at your local Rotary Club. When you arrive at the lawn mower shop, you notice that they also stock Model A305, which has some fancy, desirable new options. This premium model costs $2,250. Considering the previous night's winnings, will you indulge yourself by purchasing the A305? a. yes. b. no.arrow_forward
- Hope you can answer this with the right format. Please provide a picture also so that i can understand. Thankyou!arrow_forwardOnly typing. ..arrow_forwardQ1.Determine the production plan that will maximise the weekly profit of MJD Ltd and prepare a profit statement showing the profit your plan will yield. Q2.The marketing director of MJD Ltd is concerned about the company’s ability to meet the quantity demanded by its customers. Two alternative strategies are being considered to overcome this: To increase the number of hours worked using the existing machinery by working overtime. Such overtime would be paid at a premium of 50% above normal labour rates, and variable overheads costs would be expected to increase in proportion to labour costs. To buy product B from an overseas supplier at a cost of £19 per unit; which includes the cost of delivery. This purchased product would need to be repackaged at a cost of £1 per unit before it can be sold Evaluate each of the two alternative strategies and write a report to the marketing director discussing which strategy should be adopted.arrow_forward
- The gross profit margin indicates how profitable sales have been. Q.1 Calculate the gross profit margin for Pearson & Litt for 2020.Q.2 Explain the results of the gross profit margin calculation.arrow_forwardBased the LTV example in the marketing math spreadsheet, what is false? a. Life time value for the Home Theater example is 950 dollars. b. Can affect how managers work with customers. c. NPV adjusts profits from different years because 1 dollar earned in year one has a different worth than 1 dollar earned in the 5th year. d. Is a long-term evaluation of customers. e. Fixed costs really hurt positive LTV numbers.arrow_forwardimportant note: NNNN = 8428arrow_forward
- Angie Silva recently opened The Sandal Shop in Brisbane, Australia, a store specializing in fashionable sandals. In time, she hopes to open a chain of sandal shops. As a first step, she gathered the following data for her new store: Sales price per pair of sandals. Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year: Building rental Equipment depreciation. Selling Administrative Total fixed expenses Problem 5-30 (Algo) Part 5 Sales (3,500 pairs) Variable expenses Contribution margin Fixed expenses Net operating income $ 112,000 56,000 56,000 48,000 $ 8,000 Required: 5. Refer to the original data. During the first year, the store sold only 3,500 pairs of sandals and reported the following operating results: $ 32 16 $16 $ 9,600 12,000 a. Degree of operating leverage b. Expected percentage increase in net operating income 9,600 16,800 $ 48,000 a. What is the store's degree of operating leverage? b. Angie is confident a more intense sales…arrow_forwardRequired:a) Refer to the original data, if the lunch and snack expenses increase by 20% due toincreasing price of raw material. Compute the number of children if the MESRA Kidsto meet the target operating income of RM5,000 per month.b) Briefly explain THREE benefits Cost Volume Profit analysis to the business.arrow_forwardPlease help me asap. Thank youarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cost-Volume-Profit (CVP) Analysis and Break-Even Analysis Step-by-Step, by Mike Werner; Author: Accounting Step by Step;https://www.youtube.com/watch?v=D0MOfse9OWk;License: Standard Youtube License