Question : 151.Parvez Painting provides painting services for residential and commercial customers : 1302678

151.Parvez Painting provides painting services for residential and commercial customers five days per week (Monday through Friday). Due to customer requests, the company owner, Juan Parvez, is considering staying open on Saturday. If the company stays open on Saturday, it can generate $1,600 of daily revenue and will operate work for 52 extra days per year. The incremental daily costs will be $700 for labor, $200 for paint, brushes, and supplies, $40 for transportation, and $80 for office staff. These costs do not include a share of monthly rent totaling $220, or a share of depreciation related to office equipment totaling $170. Prepare an estimate of the incremental profit for the year.

Answer

Incremental profit = $580 per day ? 52 days = $30,160

152.Vickshay Bolts has fixed costs of $40,000 and variable costs of $100,000 during a period when 10,000 units were produced.

a.Complete the following table based on the information for Vickshay Bolts:

Cost per unitThis type of cost in total

Fixed costs

Variable costs

Total cost

b.Now assume that production changes to 12,500 units and complete this table:

Cost per unitThis type of cost in total

Fixed costs

Variable costs

Total cost

c.What conclusions can you draw about the behavior of each of the following if the level of production decreases?

1.Fixed cost per unit

2.Variable cost per unit

3.Fixed costs in total

4.Variable costs in total

153.Reef Paradise is a five-star resort on the island of St. Thomas. Late on Friday, it had 10 of its 400 rooms available when the desk clerk received a call from the Hyatt Hotel that had made a booking error leaving six couples with no rooms even though their reservations were confirmed. Hyatt wants to send their customers to the Reef Paradise at the same rate the guests would have been charged at the Hyatt, $190 per room, rather than Reef’s normal rate of $240 per room.

a.If Reef Paradise accepts the guests, how much will the incremental revenue be?

b.List four examples of incremental costs that Reef Paradise will incur if it accepts the guests.

154.Sanchez Sweets is in the process of preparing a production cost budget for May. Actual costs in April for production of 7,000 batches of cookies were:

Ingredients cost              $  7,200

Rent              1,100

Labor cost              3,300

Depreciation              900

Other fixed costs                   700

Total              $13.200

The company is currently producing and selling 80,000 batches of cookies annually with each batch sold for $8.00. The company is considering lowering the price to $7.50 per batch for which management estimates this will increase sales to 90,000 batches. Ingredients and labor are the only variable costs.

a.What is the incremental cost associated with producing an extra 10,000 batches of cookies?

b.What is the incremental revenue associated with the price reduction?

c.Should Sanchez Sweets lower the price of its cookies?

155.Sanchez Sweets is in the process of preparing a production cost budget for May. Actual costs in April for production of 5,000 batches of cookies were:

Ingredients cost              $  7,200

Rent              1,100

Labor cost              3,300

Depreciation              900

Other fixed costs                            700

Total$13.200

Ingredients and labor are the only variable costs.

a.Using this information, prepare a budget for May. Assume that production will increase to 8,000 batches of cookies, reflecting an anticipated sales increase related to a change in selling price.

b.Calculate the actual cost per unit in April and the budgeted cost per unit in May. Explain why the cost per unit is expected to decrease.