Aviator Station, Inc. operates a chain of high-end athletic apparel stores. The stores sell ten different...

 

 

Transcribed Image Text:

Aviator Station, Inc. operates a chain of high-end athletic apparel stores. The stores sell ten different styles of sweatpants with identical unit costs and selling prices. A unit is defined as one pair of sweatpants. Each store has a manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. Aviator is trying to determine the desirability of opening another store, which is expected to have the following revenue and cost relationships: Per Pair Unit variable data: Selling price Cost of pants Sales commissions Total variable costs $200 $59.50 $4.50 $64 Annual fixed costs: Rent $360,000 $200,000 $180,000 $180,000 $920,000 Salaries Advertising Other fixed costs Total fixed costs Consider each question independently. 1 Assume the cost of pants ($59.50) listed above includes both variable and fixed, direct and indirect costs. a. Explain what costs would be included in each of these categories (variable, fixed, direct, and indirect). Explain which terms describe the cost behavior and which terms describe the cost classification. Why is it important to consider çost behavior and cost classification when assigning costs? b. If direct materials included in this cost ($59.50) are $10 and direct labor is $24, what is the manufacturing overhead assigned to one pair of pants? c. Calculate the plantwide predetermined overhead rate (POHR). Assume that manufacturing overhead is assigned based on direct labor hours (DLH). The actual direct labor hours to make one pair of pants is 1 hour. The information below relates to the companies estimated manufacturing and direct labor hours: Estimated Total Manufacturing Overhead for the year: $900,000 Estimated Total Direct Labor Hours for the year: 24,000 Aviator Station, Inc. operates a chain of high-end athletic apparel stores. The stores sell ten different styles of sweatpants with identical unit costs and selling prices. A unit is defined as one pair of sweatpants. Each store has a manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. Aviator is trying to determine the desirability of opening another store, which is expected to have the following revenue and cost relationships: Per Pair Unit variable data: Selling price Cost of pants Sales commissions Total variable costs $200 $59.50 $4.50 $64 Annual fixed costs: Rent $360,000 $200,000 $180,000 $180,000 $920,000 Salaries Advertising Other fixed costs Total fixed costs Consider each question independently. 1 Assume the cost of pants ($59.50) listed above includes both variable and fixed, direct and indirect costs. a. Explain what costs would be included in each of these categories (variable, fixed, direct, and indirect). Explain which terms describe the cost behavior and which terms describe the cost classification. Why is it important to consider çost behavior and cost classification when assigning costs? b. If direct materials included in this cost ($59.50) are $10 and direct labor is $24, what is the manufacturing overhead assigned to one pair of pants? c. Calculate the plantwide predetermined overhead rate (POHR). Assume that manufacturing overhead is assigned based on direct labor hours (DLH). The actual direct labor hours to make one pair of pants is 1 hour. The information below relates to the companies estimated manufacturing and direct labor hours: Estimated Total Manufacturing Overhead for the year: $900,000 Estimated Total Direct Labor Hours for the year: 24,000

Answer rating: 100% (QA)

page 1 Answe The cost of pants include Diaiecl Matesfials oi siect labon and Marufaclcort... View the full answer