Determine the equation for total operating costs

Determine the equation for total operating costs/ Managerial Accounting

Managerial Accounting

1. Cost Behavior

Assume a local Subway reported the following results for April and May-

a. Identify each cost as being fixed, variable or mixed.

b. Determine the equation for total operating costs (Fixed + Unit Variable Cost * # of sandwiches)

c. Predict the total operating costs for 2750 3000 sandwiches

d. Determine the average costs for 2750 3000 sandwiches

2. Brodsky Corp

Brodsky Company – Data for Brodsky Company is as Follows:

a. Based on the above information, calculate the break-even units.

b. If Brodsky is subject to an effective income tax rate of 40%, calculate the number of units Brodsky would have to sell to earn an after-tax profit of $100,000. Hint: operating income = Aftertax profit/ (1- tax rate).

3. Mulitple Product Breakeven

The sales mix is 2:4:4 (i.e. for every 2 Printers sold, 4 Monitors and 4 Desktops are sold).

1) Find the break-even point for each product. The company’s annual fixed costs are $28M

2) Additionally, please find the target # of units to reach an operating profit of $14M.

3) Concept question: Which product do you think Monday’s sales team will try to promote more and why? (Answer in no more than 3 sentences)

4. Optometry Clinic

You are evaluating ways to expand an optometry practice and its earnings capacity. Optometrists perform eye exams, prescribe corrective lenses (eyeglasses and contact lenses) and sell corrective lenses. One way to expand the practice is to hire an additional optometrist.  The annual cost of the optometrist, including salary, benefits and payroll taxes is $80,000.  You estimate that this individual can conduct two exams per hour at an average price to the patient of $45 per exam. The new optometrist will work 40-hour weeks for 48 weeks per year.  However, because of scheduling conflicts, patient no shows, training and other downtime, the new optometrist will not be able to conduct, bill and collect 100% of her available examination time.

From past experience, you know that each eye exam drives additional product sales. Each exam will lead to either an eyeglass sale with a net profit of $90 (does NOT include the $45 exam fee) or a contact lens sale of $65 of net profit.  On average, 60% of exams lead to eyeglass sales, 20% lead to contact lens sales, and 20% lead to no further sales.

Below are additional incremental costs for the new optometrist:

What is the minimum level of examinations the new optometrist must perform to pay for herself (break-even)?

5. Trade-off between fixed and variable costs

Dan Company – Dan Company owns and operates a nationwide chain of pizza stores.  The 500 properties Dan chain vary from low-volume, small town, single screen pizza places to high volume, big city pizza restaurants.

Management is considering the purchases of three types of pizza ovens based on baking capacity and cost. These machines would allow pizza restauarnts to sell freshly better quality pizza. This new feature would be advertised and it’s intended to increase patronage at the company’s pizza places and restaurants.

Annual rental costs and operating costs vary with the size of the ovens. The ovens’ capacities and costs are as follows:

Please calculate the break-even (indifference) points between these three sizes.

Concept question: Should management lease the same type of oven and force every chain to use the same oven type? Explain why or why not?

Attachment:- Assignment.rar