1

ACC 410

Bhadra Menon

Chapter 2 Solutions to Assignment Problems P 2-10: The cost amount to be considered for GX-100 in preparing for the bid should be -$400. This is because the cost of the additional 25 gallons and even the cost of having Environ dispose of it were also included in the cost of the first order. Actually, the cost incurred is -$400. P 2-26: The university has priced the parking permits by considering the construction costs which include the fixed cost, which is incurred only once. The annual fee should include only Maintainence and security costs, which will be a portion of $1,200. P 2-28: The analysis highly depends on what the employees do in the day that they take vacation . If they are not very productive on that day and by taking that day off, they are more productive on other days, that is a benefit. On the contrary, if it just affects their productivity on their day, it is a cost. Benefits: 1. The advantage of not having to pay the employees salary, when they are not working (in the future) 2. The rejuvenated and fresh employees who are more productive Costs: 1. The absence of 30% of people around weekends/holidays, affecting the production schedule 2. Having to pay salary for people for unproductive days P 2-34: a)The analysis
Price Raw materials Direct labor Variable overhead Incremental selling expense Variable cost Contribution margin Incremental fixed cost Incremental selling expense Total Fixed costs Method A $ 30.00 $ 5.00 $ 6.00 $ 3.00 $ 2.00 $ 16.00 $ 14.00 $ 2,440,000.00 $ 500,000.00 $ 2,940,000.00 Method B $ 30.00 $ 5.60 $ 7.20 $ 4.80 $ 2.00 $ 19.60 $ 10.40 $ 1,320,000.00 $ 500,000.00 $ 1,820,000.00

Break even point (FC/CM)

210000

175000

b) The Method B, reaches breakeven point with the selling of lesser number of units. So, it is better than Method A

2 P 2-44: a)The analysis

ACC 410

Bhadra Menon

Rent /week Variable cost Contribution margin Rented Contribution margin (at 80%) Contribution from just renting Buy and sell skis Contribution Store rent SG&A Contribution from off season Rent

Contribution from ski season $ 75.00 $ 7.00 $ 68.00 80% $ 54.40 $ $ $ $ $ $ 1,600.00 1,088.00 300.00 788.00 7,200.00 26,000.00

Profit if breakeven , then profit=0 Therefore Qb

=CM*80%*Q+1,600-720026,000

40.10

b) If Q=50, then profit = 50*788+1600-7200-26000=$7,800.00 c)If Q=50, and we need to find the percentage when it breaks even 68*20*x%*50-300*50+1,600-7,200-26,000=0 Percentage =68.5% d) The difference in percentage is due to the increase in the quantity of ski boards bought and sold