Accounting Topic #4

solution_for_7-18_question_1.xlsx

P07-18

	Student Name:
	Class:
		Problem 07-18
1.
BLUELINE TOURS, INC.
Analysis of Discontinuing Tour
Contribution margin lost if the tour is discontinued					$ (2,100) x: Enter appropriate data in yellow cells. Your final answer will be verified.
Less tour costs that can be avoided if the tour is discontinued:
Tour Promotion				$ 600
Fee, Tour Guide				700
Fuel for Bus				125
Overnight Parking Fee, Buss				50
Room and Meals, Bus Driver and Tour Guide				175	1,650
Net decrease in profits if the tour is discontinued					$ (450)
					Correct!
BLUELINE TOURS, INC.
Alternative Analysis of Discontinuing Tour
					Difference:
					Net
					Operating
			Keep	Drop	Income
			the	the	Increase or
			Tour	Tour	(Decrease)
Ticket revenue			$ 3,000	$ - x: Enter appropriate data in yellow cells. Your final answer will be verified.	$ (3,000)
Less variable expenses			900	-	900
Contribution margin			$ 2,100	$ -	$ (2,100)
Less tour expenses:
Tour promotion			$ 600	$ -	$ 600
Salary of bus driver			350	350	-
Fee, tour guide			700	-	700
Fuel for bus			125	-	125
Depreciation of bus			450	450	-
Liability insurance, bus			200	200	-
Overnight parking fees, bus			50	-	50
Room & meals, bus driver and tour guide			175	-	175
Bus maintenance and preparation			300	300	-
Total tour expenses			2,950	1,300	1,650
Net operating loss			$ (850)	$ (1,300)	$ (450)
					Correct!

Given Data P07-18:
BLUELINE TOURS, INC.
Seat capacity	100
Occupancy	40%
Ticket price	$ 75
Ticket revenue	$ 3,000	100.0%
Variable expenses	900	30.0%
Contribution margin	2,100	70.0%
Tour expenses:
Tour promotion	$ 600
Salary of bus driver	350
Fee, tour guide	700
Fuel for bus	125
Depreciation of bus	450
Liability insurance, bus	200
Overnight parking fee, bus	50
Room and meals, bus driver and tour guide	175
Bus maintenance and preparation	300
Total tour expenses	2,950
Net operating loss	$ (850)

	Student Name:
	Class:
		Problem 07-21
PIETARSAARI OY
1.
Incremental revenue:
Fixed fee
			Jack Terry: Enter appropriate data in yellow cells. Your final answers will be verified.	Reimbursement for costs of production
Total incremental revenue
Incremental costs:
Variable production costs
Increase in net operating income

2.
Sales:
Decrease in revenue received
Less variable selling expenses avoided
if the army's order is accepted
Net decrease in net operating income with the army's offer

Given Data P07-21:
PIETARSAARI OY
Ski poles (pairs) produced at capacity	50,000
Selling price per pair	32
	Per Pair	Total
Direct materials	12	600000
Direct labor	3	150,000
Variable manufacturing overhead	1	50,000
Fixed manufacturing overhead	5	250,000
Variable selling expense	2	100,000
Fixed selling expense	4	200,000
Total cost	27	1350000
Fixed manufacturing overhead within
range of 40,000 to 50,000 pairs of ski poles per year		250000
Information for 1:
Expected number of units to
be sold this year		40,000
Army offer:
Units purchased		10,000
Fixed fee paid per pair		4
Plus all fixed and variable unit manufacturing costs
Information for 2:
Expected number of units to
be sold next year		50,000
Army offer:
Units purchased		10,000
Fixed fee paid per pair		4
Plus all fixed and variable costs of production

	Student Name:
	Class:
		Problem 07-23
1.
THRIFTY MARKETS, INC.
Schedule
Gross margin lost if the store is closed
Less costs that can be avoided:
Direct advertising
Sales salaries
Delivery salaries
Store rent
Store management salaries
General office salaries
Utilities
Insurance on inventories
Employment taxes*
			Jack Terry: NOTE: This number is calculated below.	Decrease in company net operating income
if the Downtown Store is closed

*Salaries avoided by closing store:
Sales salaries
Delivery salaries
Store management salaries
General office salaries
Total salaries
Employment tax rate
Employment taxes avoided

3. Computations
Gross margin lost if the Downtown Store is closed
				x: Enter appropriate data in yellow cells. Your answer for net advantage will be verified.	x: Enter appropriate data in yellow cells. Your answer for decrease in company net operating income will be verified.	Gross margin gained at the Uptown Store
Net loss in gross margin
Less avoidable costs if Downtown Store is closed
Net advantage of closing the Downtown Store

Given Data P07-23:
THRIFTY MARKETS, INC.
Income Statement
For the Quarter Ended March 31
		Uptown	Downtown	Westpark
	Total	Store	Store	Store
Sales	$ 2,500,000	$ 900,000	$ 600,000	$ 1,000,000
Cost of goods sold	1,450,000	513,000	372,000	565,000
Gross margin	1,050,000	387,000	228,000	435,000
Selling and administrative expenses:
Selling expenses:
Direct advertising	118,500	40,000	36,000	42,500
General advertising	20,000	7,200	4,800	8,000
Sales salaries	157,000	52,000	45,000	60,000
Delivery salaries	30,000	10,000	10,000	10,000
Store rent	215,000	70,000	65,000	80,000
Depreciation of store fixtures	46,950	18,300	8,800	19,850
Depreciation of delivery equipment	27,000	9,000	9,000	9,000
Total selling expenses	614,450	206,500	178,600	229,350
Administrative expenses:
Store management salaries	63,000	20,000	18,000	25,000
General office salaries	50,000	18,000	12,000	20,000
Utilities	89,800	31,000	27,200	31,600
Insurance on fixtures and inventory	25,500	8,000	9,000	8,500
Employment taxes	36,000	12,000	10,200	13,800
General office expenses - other	25,000	9,000	6,000	10,000
Total administrative expenses	289,300	98,000	82,400	108,900
Total operating expenses	903,750	304,500	261,000	338,250
Net operating income (loss)	$ 146,250	$ 82,500	$ (33,000)	$ 96,750
Additional Data:
Manager's salary per quarter	$ 18,000
New employee's salary per quarter	$ 5,000
Employment tax as a percentage of salaries	12%
Delivery person's salary per quarter	$ 7,000
Insurance related to downtown fixtures	1/3
Discharged employee's salary per quarter	$ 8,000
Assumed sales transferred to Uptown store	$ 200,000
Uptown store gross margin percentage	43%