Better Battery has been in the battery renewal business for four years. It rents a building but
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Question:
Better Battery has been in the battery renewal business for four years. It rents a building but owns all of its equipment. All employees are paid a fixed salary except for the busy season (April - June), when temporary help is hired by the hour. Utilities and other operating charges remain fairly constant during each month, except those in the busy season.
Selling prices per battery average $100, except during the busy season. Because a large number of customers buy batteries prior to winter, discounts run above average during the busy season. A 15 percent discount is given when two batteries are purchased at one time. During the busy months selling prices per battery average $90.
The president of Better Battery is somewhat displeased with the company's management accounting system because the cost behavior pattern displayed by the monthly break-even charts are inconsistent; the busy month's charts are different from the other months of the year. The president is never sure if the company has a satisfactory margin of safety or if it is just above the break-even point.
Required:
a. What is wrong with the accountant's computations?
b. How can the information be presented in a better format for the president?
Assume the sales price is $34 per unit and the variable cost is $19 per unit. The break-even point is 12,000 units. What are total fixed costs?
Selling prices per battery average $100, except during the busy season. Because a large number of customers buy batteries prior to winter, discounts run above average during the busy season. A 15 percent discount is given when two batteries are purchased at one time. During the busy months selling prices per battery average $90.
The president of Better Battery is somewhat displeased with the company's management accounting system because the cost behavior pattern displayed by the monthly break-even charts are inconsistent; the busy month's charts are different from the other months of the year. The president is never sure if the company has a satisfactory margin of safety or if it is just above the break-even point.
Required:
a. What is wrong with the accountant's computations?
b. How can the information be presented in a better format for the president?
Assume the sales price is $34 per unit and the variable cost is $19 per unit. The break-even point is 12,000 units. What are total fixed costs?
Related Book For
Managerial Accounting
ISBN: 978-0133025071
2nd canadian edition
Authors: Karen W. Braun, Wendy M. Tietz, Rhonda Pyper
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