I am having a hard time doing this and this is Hospitality managerial accounting

Chapter Seven - Discussion Questions (Pg. 321) 7.1 Differentiate between a direct cost and an indirect cost. 7.3 Differentiate between a fixed cost and a variable cost and give an example of each that is not in the text. 7.4 Why are some costs known as semifixed or semivariable? 7.7 Explain why it sometimes makes sense to sell below total cost. 7.8 Define the term high operating leverage and explain why in times of increasing sales revenue it is more profitable to have high rather than low operating leverage. Chapter Seven - Exercises (Pg. 322-323) E7.1 If sales revenue is $6,800 and variable costs are $2,856, what is the variable cost percentage? Sales Variable cost Variable rate $6,800 $2,856 42.0% Variable Cost Formula: E7.2 If sales revenue is $48,840 and variable costs are 43% what is the dollar contribution margin? Sales Variable cost Contribution in dollars $48,840 43.0% $4,070.0 Dollar Contribution Formula: E7.3 You are asked to cater a buffet for 70 people at $18/person. Your variable cost is 68% and fixed costs are $100 per day. Calculate contribution margin in dollars and operating income. Should you accept? Customer count Price Variable cost Fixed cost 70 $18.00 68% $100.00 Revenue Variable cost at 68% Contribution margin Fixed cost Operating income $1,260 857 403 100 303 E7.5 Use the High-Low Method with the following data to determine the variable cost per guest and the total fixed costs, using both the high and the low data to confirm calculations. Maximum Minimum Difference or Guests 18,000 12,000 6,000 Variable Cost per Guest Labor Cost 25,500 18,000 7,500 Three steps of the High-Low Method: $1.25 Maximum Labor Cost Variable Cost for High Data Fixed Cost 25,500 22,500 3,000 Minimum Labor Cost Variable Cost for Low Data Fixed Cost 18,000 15,000 3,000 If your answer is correct the fixed cost computation must be the same for high and low E7.8 You are offered a five year lease at a fixed cost of $42,000 per year or a variable lease rate equal to 10% of revenue. Sales are projected to be $505,000. Find the indifference point and determine which lease offer you would accept. Fixed lease cost Variable lease rate Sales projection Indifference point $42,000 10% $505,000 $420,000 Which option would you choose and why? Indifference Point Formula: Chapter Seven - Problems (Pg. 323-324) P7.1 Using the concept of relevant costs over a five year period, which model is the lowest cost alternative? Cost Estimated life Trade In value after 5 years Cash from sale of current machine Installation cost Training cost Annual labor cost Annual maintenance cost Annual supplies cost Total Relevant One-Time Costs Total Relevant Annual Costs Total Relevant Five Year Costs Recommendation: Model A $5,000 5 years 1,000 200 80 350 32,000 275 175 Model B $5,500 5 years 1,200 200 120 300 32,000 300 225 Model C $5,300 5 years 800 200 100 325 32,000 250 200 Relevant? Chapter Seven - Problems (Pg. 324) P7.2 Fixed costs of the banquet unit are $350/day. An event for 100 guests has a food cost of $6.50/person, labor costs of $2.75/person and other variable costs of $1.25/person a. Calculate the total cost per person at this event Total Fixed Costs Food/guest Labor/guest Other costs/guest Total Variable Cost/Guest Fixed Cost per Guest Total Cost per Guest $350 6.50 2.75 1.25 10.50 3.50 $14.00 b. What should the total price and total price per person be if a 20% operating income is desired? Price Per Guest (20% margin) Total Revenue (20% margin) $0.80 $18 c. Customer is a regular and does not want to pay more than $13.75/person. No other event could be booked. What are the comparative costs? Would you accept that price?. Total Revenue Food Cost Variable Wage Other Variable Costs Fixed Costs Total Cost Net Loss Recommendation: Function accepted at $13.75 1,375 1,050 325 Function not accepted Chapter Seven - Problems (Pg. 325-326) P7.4 Use the following quarterly income statements for a resort restaurant in this analysis: Quarter 1 $86,400 32,800 53,600 Quarter 2 $97,000 35,900 61,100 Quarter 3 $89,400 33,100 56,300 Quarter 4 $46,400 18,100 28,300 Total $319,200 119,900 199,300 Wages Supplies Advertising Utilities Maintenance Insurance Interest Depreciation Rent Total Expenses 32,000 1,900 900 2,600 450 1,200 750 700 6,000 46,500 35,900 2,200 900 2,900 450 1,200 750 700 6,000 51,000 33,100 1,970 900 2,680 400 1,200 750 700 6,000 47,700 17,800 1,100 600 2,400 400 1,200 750 700 6,000 30,950 118,800 7,170 3,300 10,580 1,700 4,800 3,000 2,800 24,000 176,150 Operating Income/(Loss) $7,100 $10,100 $8,600 ($2,650) Quarter 4 Fixed Expenses Quarter 4 Variable Expenses Total Quarter 4 Expenses $23,150 Revenue Cost of Sales Gross Margin 39.01% 60.99% 3,000 0 300 100 200 480 750 175 6,000 31.90% 2.37% 0.65% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% The owner is considering closing the restaurant during the fourth quarter to eliminate the loss. Make a recommendation about this idea after completing the table on Quarter 4 Fixed and Variable Expenses. Recommendation: Chapter Seven - Problems (Pg. 327) P7.6 Consider the following data on two motels which are both for sale. Revenue Variable Costs Fixed Costs Operating Income Present Condition Jacks $550,000 55.0% 212,500 Jocks $550,000 60.0% 185,000 After purchase it is believed that both restaurants could have sales increased by 25%. Jacks could have interest expense lowered by $12,000. Jocks could have variable expenses reduced to 54%. Calculate the new income statement for each motel. After Purchase and Changes Jacks Revenue Variable Costs Fixed Costs Operating Income 55.0% Jocks 54.0% Make a recommendation on which to buy and give any cautions you feel appropriate: Chapter Seven - Problems (Pg. 328) P7.9 Consider the following sales and wage cost information for a restaurant: January February March April May June July August September October November December Total Revenue 11,200 13,000 14,900 19,100 22,000 24,200 26,300 27,400 23,500 20,100 18,200 16,000 $235,900 Wages 5,300 6,100 6,200 7,000 9,000 9,600 9,700 10,100 8,300 7,600 8,000 7,100 $94,000 High or Low? Now identify the high and low months and conduct a High-Low analysis of the data to determine Variable Cost % and Fixed Costs in the High and Low months. Revenue Wages Maximum Minimum Difference or Variable Cost Percentage Maximum Labor Cost Variable Cost for High Data Fixed Cost Minimum Labor Cost Variable Cost for Low Data Fixed Cost Finally, using the calculated Variable Cost %, give the breakdown of Total Annual Wages into Fixed and Variable components. Percentage Total Annual Wages Variable Cost Total Fixed Costs Total Dollars $94,000 Chapter Eight - Discussion Questions (Pg. 357-358) 1. Discuss two of the assumptions built into CVP analysis. 6. What is the equation for calculating a particular sales level in dollars using CVP analysis ? 7. What is the equation for calculating required sales level in units using CVP analysis? 8. Define the term contribution margin. 9. If management wants to know the sales level it would have to achieve to make a specific profit, how can the required sales level be calculated? 11. A restaurant has a food department and a beverage department. Total sales are 80% food and 20% beverages. Food variable costs are 35% and beverage variable costs are 33%. What is the restaurant's combined contribution margin? Food Beverage Variable Cost % Contribution Margin % Proportion of Sales Combined Contribution Margin % 12. State the equation for converting an after-tax profit to a before-tax profit. Chapter Eight - Exercises (Pg. 358-359) E8.1 A restaurant has sales revenue of $320,000, fixed costs of $108,000 and variable costs of $128,000. What is the breakeven sales revenue? Sales Fixed cost Variable costs Variable cost % Contribution margin % BEP Revenue Break-Even Point Revenue Formula: E8.2 Fixed costs are $137,500 and variable costs are 45%. What is the breakeven sales revenue? Fixed cost Variable cost % Contribution margin % BEP Revenue E8.3 Fixed costs are $240,000 and the contribution margin is 48%. What is the breakeven sales revenue? Fixed cost Contribution margin % BEP Revenue E8.4 A restaurant has fixed costs of $53,400 for the month of March. The average check is $12.95 with an average variable cost of $7.38. What is the breakeven sales revenue in terms of number of meals? Fixed cost Check average Variable cost Contribution margin per check BEP Units Break-Even Point Unit Formula: E8.5 A small pub serving only specialty beer has fixed costs of $62,400 per year. The average contribution margin per sale is $2.08. What is the breakeven point in sales units? Fixed Cost Contribution margin per sale BEP Units E8.6 A restaurant has an average check of $12.75 with an average variable cost of $4.85. Fixed costs are $142,200. Calculate the following: Check average Variable cost Contribution margin per check Fixed cost BEP Units Variable cost % Contribution margin % BEP Revenue E8.9 A business has variable costs equal to 72% of sales. The owner wants to increase sales revenue enough to provide an additional $9,600 in annual operating income. How much additional sales are required? Additional income desired Variable cost % Contribution margin % Increase in revenue Chapter Eight - Problems (Pg. 360) P8.1 A restaurant with an average check of $14 per guest has the following average monthly data. a. What is the breakeaven sales revenue? Sales Variable costs Fixed costs Variable cost % Contribution margin % BEP Revenue $700,000 434,000 168,000 b. If actual sales revenue was $640,000, what would the operating income be? Sales Variable costs Fixed costs Operating Income $640,000 Operating Income Formula: c. If actual revenue was $640,000, how many fewer customers would be served than if revenue was $700,000. The average check is $14. Customers at $640,000 Customer at $700,000 Difference in customers Chapter Eight - Problems (Pg. 360) P8.2 A small inn has annual fixed costs of $88,000, variable costs of 68% and a tax rate of 30%. The owner wants an after-tax net income of $33,600. What revenue is required to achieve this? Fixed costs Variable cost % Contribution rate % After-tax income Tax rate Pre-tax income Revenue $88,000 68.0% 33,600 30.0% Required Revenue (Given Fixed Costs and Income Goal) Formula Prepare a contribution margin income statement to confirm the calculated revenue. Revenue Variable cost at 68% Fixed costs Pre-tax income Chapter Eight - Problems (Pg. 360) P8.3 A restaurant is being planned that will require an equipment investment of $150,000. The forecasted variable and known fixed costs are listed in the table below. Fill in any missing data. a. What is the breakeven sales revenue for the restaurant? Variable Costs Food Cost Variable Wages Other Items Total Variable Cost % Contribution % Known Fixed Costs Management Salary Insurance Advertising Utilities Rent Equipment depreciation @ 20% Total Fixed Costs 38% 27% 10% $48,000 2,800 4,500 3,000 21,600 Breakeven Sales Prepare a contribution margin income statement to confirm the breakeven calculation. Revenue Food @ 38% Wages @ 27% Other Costs @ 10% Total Variable Costs Contributory Income Fixed Costs Net Operating Income If the owner wants an 18% before-tax operating income on his $150,000 investment, what sales level is required? Pre-Tax Return on Investment Sales Revenue Required Prepare a contribution margin income statement to confirm the CVP required sales calculation. Revenue Food @ 38% Wages @ 27% Other Costs @ 10% Total Variable Costs Contributory Income Fixed Costs Net Operating Income Chapter Eight - Problems (Pg. 361) P8.5 A motel has 70 rooms it usually rents out in the following proportions: 45% singles @ $60, 35% doubles @ $74, 20% triples @ $90. The annual fixed costs are $445,000 and the variable costs are $14 per room occupied. a. Calculate the motel's breakeven level and its occupancy % at that level. Average Room Rate Computation 45% Singles @ $60 35% Doubles @ $74 20% Triples @ $90 Average Room Rate Variable Cost per Room Contribution Margin per Room Fixed Costs $14.00 $445,000 BEP (Number of Rooms) Rooms Available per Year Room BEP Occupancy % b. Calculate the occupancy % required to provide $65,000 of operating income. Assume same contribution margin per room as above. Fixed Costs Pre-Tax Operating Income Goal Fixed Costs plus Income Goal Total Rooms Required to Meet Goal Required Occupancy % $445,000 65,000 c. Calculate the occupancy % required to provide $65,000 of operating income. Assume average room rate has decreased by 20% from the original rate 20% Lower Average Room Rate New Contribution Margin per Room Fixed Costs plus Income Goal Total Rooms Required to Meet Goal Required Occupancy % c. Calculate the occupancy % required to provide $65,000 of operating income. Assume average room rate has increased by 10% from the original rate. Also assume that variable cost per room is now $16.00 and that an additional $30,000 per year is spent on advertising. 10% Larger Average Room Rate Variable Cost per Room New Contribution Margin per Room Additional Annual Advertising Expense New Fixed Costs plus Income Goal Total Rooms Required to Meet Goal Required Occupancy % $16.00 $30,000 Chapter Eight - Problems (Pg. 362) P8.7 The Relax Inn's rooms department has annual sales of $600,000 and variable costs of $180,000. The inn's food department has annual sales of $200,000 and variable costs of $160,000. The inn's fixed costs are $220,000. The total sales of the inn from all operations is $800,000. First complete this operating income statement, calculating joint contribution rate: Revenue Variable Costs Variable Cost % Contribution Margin % Revenue % by Department Operating Income Contribution Fixed Costs Operating Income Rooms $600,000 180,000 F&B $200,000 160,000 Total 220,000 Combined Contribution Margin Formula: a. Calculate the inn's breakeven sales level assuming the ratio of room sales to food sales remains constant at any total sales level. Fixed Costs for the Inn Combined Contribution Margin % Breakeven Sales Point $220,000 b. The inn's owners want to increase food sales by spending an additional $1,000 per year on brochures. How much incremental food sales are required to cover this cost, assuming the room sales remain constant? Cost of Brochure Contribution Margin % Additional Food Sales Required $1,000 c. The inn's owners want to increase operating income by $40,000 by increasing room occupancy. How much more room sales are required to achieve this goal, assuming the food sales remain constant? Additional Operating Income Contribution Margin % Additional Room Sales Required $40,000