Problem #1: Cost Estimation Anna Marinez, manager of the Dos Coyot...

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Problem #1: Cost Estimation Anna Marinez, manager of the Dos Coyotes restaurant, wants to see whether her new advertising campaign is working to increase sales. She obtained the following data for the last nine months. Month Revenues Advertising apr $200,000 $52,000 may $270,000 $65,000 jun $320,000 $80,000 jul $480,000 $90,000 aug $430,000 $100,000 sep $450,000 $110,000 oct $540,000 $120,000 nov $670,000 $180,000 dec $751,000 $197,000 total $4,111,000 $994,000 (1) What is the incremental revenue per dollar of advertising? (2) What is revenue in the absence of advertising? (3) What are expected revenues with $180,000 of advertising? (4) You have been asked to comment on the results. You observe that the effect of advertising on revenue is an insufficient analysis. After all, increased revenues bring increased costs for food, beverages, and waitstaff salaries. You find the following information about the restaurant's profitability without advertising. per customer $35.00 $15.00 $7.00 $4.00 $3.00 revenue food & beverage waitstaff salaries* occupancy costs mgmt salaries gross profit $6.00 What is the minimum revenue required for a dollar of advertising? Problem #2: Standard Costing Ultra, Inc. manufactures and sells a full line of sunglasses. The company uses a standard cost system. Department managers' are held responsible for the explanation of the variances in their department performance reports. Recently, the variances in the Prestige line of sunglasses have been of concern. Data for the month of August is presented below. Assume beginning and ending inventory levels for WiP and FG are zero. $600,000 $625,000 $150,000 $163,400 $135,000 $138,700 $114,000 $121,000 revenues DM DL FOH (cost driver = DL hours) gross profit selling price per Prestige sunglass DM (total # ounces) DL rate ($ per DL hour) Static Budget $201,000 Actual $201,900 $76.92 $76.22 15,600 16,100 $18.00 $19.55 (1) Prepare the journal entry for the purchase of DM. Assume DM ourchases = DM used. DM inventory DM spending variance accounts payable (2) Prepare the journal entry for the release of DM into production. WiP inventory DM efficiency variance DM inventory (3) Prepare the journal entries for DL. DL expense wages payable WiP inventory DL efficiency variance DL spending variance DL expense (4) Prepare the journal entries for FOH. FOH expenses accounts payable mfg FOH control FOH expenses WiP inventory mfg FOH control mfg FOH control FOH volume variance FOH spending variance (5) Prepare the adjusting entries to close out the variance accounts. DM spending variance CGS DM efficiency variance CGS DL spending variance CGS DL efficiency variances CGS FOH volume variance CGS FOH spending variance CGS (6) Complete the CGS T‐Account below. CGS DM @ std DL @ std FOH @ std Adjustments to CGS Adjusted CGS Problem #3: Birthday Parties, Inc. Linda Olson recently started a professional characters business in a large metropolitan area. She hires local college students to play these characters at children's parties and other events. Linda provides food and beverages plus the entertainment. The business is growing and Linda believes she needs a better way to estimnate costs in order to be competitive in bidding for parties. In particular she needs to know her variable costs and contribution margin. For a standard party, the cost per child and price is estimated as follows. food & beverage DL for actors* OH** total cost per child markup price per child $28.60 $7.00 $5.00 $10.00 $22.00 30.0% $6.60 * Estimated as .25 hours per child X $20.00 per hour. Parties range from one to four hours in duration. hours / child wage rate 0.25 $20.00 ** Estimated as .25 hours per child X $40.00 per hour. The OH per DL hour is an average computed from the data shown below. hours / child OH / DL hour 0.25 $40.00 Linda is quite certain about food, beverage and DL costs (actors) but is not as comfortable with the OH costs. Data is presented below. month DL hours Actual OH Costs apr 1,400 $65,000 may 1,800 $71,000 jun 2,100 $73,000 jul 2,200 $76,000 aug 1,650 $67,000 sep 1,725 $68,000 oct 1,500 $66,500 nov 1,200 $60,000 dec 1,900 $72,500 total 15,475 $619,000 average OH per DL hour $40.00 slope coefficient 14.664 Plot the OH vs DL hours with the trendline equation and the R2. Now calculate the CM per child for a party of 20 children that is scheduled for two hours. number of children duration of party (hours) 20 2 per child number of children duration of party (hours) price (30% markup) food & beverage DL VOH CM

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