Question

Required information

Camp Rainbow offers overnight summer camp programs for children ages 10–14 every summer during June and July. Each camp session is one week and can accommodate up to 200 children. The camp is not coed, so boys attend during the odd-numbered weeks and girls attend during the even-numbered weeks. While at the camp, participants make crafts, participate in various sports, help care for the camp’s resident animals, have cookouts and hayrides, and help assemble toys for local underprivileged children.

The camp provides all food as well as materials for all craft classes and the toys to be assembled. One cabin can accommodate up to 10 children, and one camp counselor is assigned to each cabin. Three camp managers are on-site regardless of the number of campers enrolled.

Following is the cost information for Camp Rainbow’s operations last summer:

Week	Number of Campers	Cost to Run Camp
1	94	$8,630
2	140	11,740
3	108	8,830
4	120	9,400
5	118	9,010
6	100	8,610
7	90	8,680
8	124	9,590

	Coefficients
Intercept	3,518.27
X Variable 1	52.39

Suppose that Rainbow is contemplating staying open one additional week during the summer.

Required:

1. Using the results of the least-squares regression analysis, determine Rainbow’s contribution margin per camper if each camper pays $159 to attend the camp for a week.

2. Using the results of the least-squares regression analysis, prepare a contribution margin income statement for week 9 assuming Rainbow expects to have 90 campers that week.

3. Should Rainbow add a ninth week to its schedule?

Required 1 Required 2 Required 3 Using the results of the least-squares regression analysis, determine Rainbow's contribution margin per camper if each camper pays $159 to attend the camp for a week. (Round your unit contribution margin and contribution margin percentage ratio to two decimal places.(i.e. 0.1234 should be entered as 12.34%.)). Unit Contribution Margin Contribution Margin Ratio per camper % Required 1 Required 2 >

Answer 1

28 1. Using the results of the least-squares regression analysis, determine Rainbow's contribution 29 margin per camper if each camper pays $159 to attend the camp for a week. 30 Camper Pays 159 Less Variable Expenses -52.39 Contribution Margin Per Unit 106.61 Per Camper Contribution Margin Ratio Contribution Margin Selling Price 106.61 159 Contribution Margin Ratio 67.05%

43 2. Using the results of the least-squares regression analysis, prepare a contribution margin income 44 statement for week 9 assuming Rainbow expects to have 90 campers that week. 45 CAMP RAINBOW Contribution Margin Income Statement For Possible 9th Week Sales Revenue (90*159) 14,310.00 Variable Costs (90 *52.39) 4,715.10 Contribution Margin 9,594.90 Fixed Costs 3,518.27 Net Operating Income 6,076.63 55 3. Should Rainbow add a ninth week to its schedule? 56 57 Yes