Question

please solve 1-4 in detail

Chapter 2 An Introduction to Cost Terms and Purposes Function Representative Cost Driver 1. Accounting 2. Human resources 3. Data processing 4. Research and development 5. Purchasing 6. Distribution 7. Billing A. Number of invoices sent B. Number of purchase orders C. Number of research scientists D. Hours of computer processing unit (CPU) E. Number of employees F Number of transactions processed G. Number of deliveries made Required 1. Match each function with its representative cost driver. 2. Give a second example of a cost driver for each function. 2-21 Total costs and unit costs. A student association has hired a band and a caterer for a graduation party. The band will charge a fixed fee of $2,000 for an evening of music, and the caterer will charge a fixed fee of $1,200 for the party setup and an additional $18 per person who attends. The caterer will provide snacks and soft drinks for the duration of the party. Students attending the party will pay $10 each at the door to help reduce the student association's cost of holding the event. Required 1. Draw a graph depicting the fixed cost, the variable cost, and the total cost to the student association for different attendance levels. 2 Suppose 100 people attend the party. What is the total cost to the student association? What is the cost per person? 3. Suppose 500 people attend the party. What is the total cost to the student association and the cost per attendee? 4. Draw a graph depicting the cost per attendee for different attendance levels. As president of the student association, you want to request a grant to cover some of the party costs. Will you use the per attendee cost numbers to make your case? Why or why not?

please solve 1-3 in only 3-34.

could you please tell why you solved the problem like that

Answer 1

2-21

1.

Attendance Fixed Cost Variable Cost Recovery Net Variable Cost Total Cost 100 $ 3,200 $ 1,800 $ -1,000 $ 800 $ 4,000 200$ 3,200 $ 3,600 $ -2,000 $ 1,600 $ 4,800 300 $ 3,200 $ 5,400 $ -3,000 $ 2,400 $ 5,600 400 $ 3,200 $ 7,200 $ -4,000 $ 3,200 $ 6,400 500 $ 3,200 $ 9,000 $ -5,000 $ 4,000 $ 7,200 Chart Title $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2.000 100 500 200 300 Fixed Cost --Net Variable Cost 400 Total Cost

2. If 100 students attend, the total cost would be

Fixed Cost - $2000 (band) +$1200 (caterer) = $3200

Variable Cost - 100 students x $8 = $800. (Multiplying with $8 as the cost charged by caterer is 18$ and recovery from the students is 10$, so net 18-10=8)

Total Cost for 100 students = 3200+800 = $4000

Cost per attendee = 4000/100 = $40 per attendee

3. If 500 students attend, the total cost would be

Fixed Cost - $2000 (band) +$1200 (caterer) = $3200

Variable Cost - 500 students x $8 = $4000. (Multiplying with $8 as the cost charged by caterer is 18$ and recovery from the students is 10$, so net 18-10=8)

Total Cost for 100 students = 3200+4000 = $7200

Cost per attendee =7200/500 = $14.40 per attendee

4.

Attendance Cost per Attendee 100 $ 40.00 200 $ 24.00 300 $ 18.67 400 $ 16.00 500 $ 14.40 Cost per Attendee $45.00 $40.00 $35.00 Cost per Attende $20.00 $15.00 100 200 400 500 600 300 Attendance

As the president of the student association, if the number of attendee are greater than 320, (total fixed cost / contribution per attendee) ($3200/$10), we would use cost per attendee as a base to recover the cost. However if the attendance is less than 320, we would not use the cost per attendee as the fixed costs itself would not be recovered.

3-34

1. First find out the Contribution margin of Small Trampoline (ST) and Large Trampoline(LT)

Contribution Margin = Sales price - Variable Cost

CM for ST = 200-120 = $80

CM for BT = 600-420 = $180

Given sales mix is 4 ST for 1 LT.

Let 4 ST along with 1 LT 1 unit of Sale. (Say Total Sale (TS))

So contribution from that 1 unit (TS) will be (4 x 80) + (1 x 180) = $500.

Given Fixed Cost is $ 1,250,000.

So number of units to be sold for break even will be Fixed Cost divided by Contribution from 1 TS.

1,250,000/500 = 2500 units of TS.

Break even in Units

This amounts to 2500 x 4 = 10,000 units of Small Trampoline

2500 x 1 = 2500 units of Large Trampoline.

Total units 12500 units.

Break even in Sales

10,000 units of ST x $ 200 = $2,000,000

2500 units of LT x $ 600 = $ 1,500,000

Total Break even Sales = 3,500,000.

2.

Increase in Fixed cost by 202,000. New Fixed cost to be recovered = 1,250,000+202,000 = 1,452,000.

Change in Contribution Margins

CM of ST = 200-(120-15) = $95

CM of LT = 600 - (420-45) = $225.

Given that the same sales mix will continue.

Given sales mix is 4 ST for 1 LT.

Let 4 ST along with 1 LT 1 unit of Sale. (Say Total Sale (TS))

So contribution from that 1 unit (TS) will be (4 x 95) + (1 x 225) = $605.

Given Fixed Cost is $ 1,452,000.

So number of units to be sold for break even will be Fixed Cost divided by Contribution from 1 TS.

1,452,000/605 = 2400 units of TS.

Break even in Units

This amounts to 2400 x 4 = 9,600 units of Small Trampoline

2400 x 1 = 2400 units of Large Trampoline.

Total units 12000 units

Break even in Sales

9600 units of ST x $ 200 = $1,920,000

2400 units of LT x $ 600 = $ 1,440,000

Total Break even Sales = 3,360,000.

3.

Indifference point is nothing but the point where choosing either of the 2 options will not impact out profitability

Contribution Margin - Fixed Cost should be the same for "T" number of units

500 x T - 1,250,000 = 605 x T - 1,452,000

105T = 202,000

T = 202000/105

= 1925 (rounded off to nearest 5 for easier calculation)

The indifference point of sales will be Break even point as per Option 1 + 1925 units

12500+1925 = 14425 units.

As 13000 units of sales lie below the indifference point of 14425 units. It would be favourable to use Option 2 that is it should buy the new equipment.