Peggy Grear just fulfilled a dream as she completed her first season as the owner of...

  

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Peggy Grear just fulfilled a dream as she completed her first season as the owner of a rafting company. Unfortunately, her operation was not profitable in its first year of operation. She has enough savings to get her through another season or two, but she realizes that she will have to start making a profit or give up the dream. Her company's income statement for the first year of operation follows. Grear Rafting Company Income Statement For the Year Ended December 31, 2015 $1,048,000 (208,600) 1314,400) 50,000) (471,600) 16,500) | 31,440) 3.850) S 48,390 Revenue Rental Cost of Rafts and Camping Equipment Meals Provided to Rafters Advertising Expenses Compensation Paid to Guides Salary of Office Manager T-shirts and Hats Provided to Rafters Office Utility Expense Net Income (Loss) The rafts and equipment are rented on an annual basis. Additional rafts and equipment are NOT available, nor is an allowance provided for early returns. Guides are paid on a commission basis. The rafting trip is for seven (7) days. Ms. Grear's company served 1,048 rafters during the year. Items to be Addressed in Your Paper 1. Define a variable cost. 2. Define a fixed cost. 3. Identify which of the costs are variable relative to the number of rafters. 4. Identify which of the costs are fixed relative to the number of rafters. 5. Define a product cost and identify which of the costs are product costs. 6. Define a period cost and identify which of the costs are period costs. 7. Restate the Income Statement in a contribution format using GOOD form. (Be sure to specify the current number of rafters.) 8. What number of rafters would be required to breakeven? 9. What actions could Ms. Grear take to improve profitability of her company? (There are several obvious changes.) Would these actions affect breakeven and how? Peggy Grear just fulfilled a dream as she completed her first season as the owner of a rafting company. Unfortunately, her operation was not profitable in its first year of operation. She has enough savings to get her through another season or two, but she realizes that she will have to start making a profit or give up the dream. Her company's income statement for the first year of operation follows. Grear Rafting Company Income Statement For the Year Ended December 31, 2015 $1,048,000 (208,600) 1314,400) 50,000) (471,600) 16,500) | 31,440) 3.850) S 48,390 Revenue Rental Cost of Rafts and Camping Equipment Meals Provided to Rafters Advertising Expenses Compensation Paid to Guides Salary of Office Manager T-shirts and Hats Provided to Rafters Office Utility Expense Net Income (Loss) The rafts and equipment are rented on an annual basis. Additional rafts and equipment are NOT available, nor is an allowance provided for early returns. Guides are paid on a commission basis. The rafting trip is for seven (7) days. Ms. Grear's company served 1,048 rafters during the year. Items to be Addressed in Your Paper 1. Define a variable cost. 2. Define a fixed cost. 3. Identify which of the costs are variable relative to the number of rafters. 4. Identify which of the costs are fixed relative to the number of rafters. 5. Define a product cost and identify which of the costs are product costs. 6. Define a period cost and identify which of the costs are period costs. 7. Restate the Income Statement in a contribution format using GOOD form. (Be sure to specify the current number of rafters.) 8. What number of rafters would be required to breakeven? 9. What actions could Ms. Grear take to improve profitability of her company? (There are several obvious changes.) Would these actions affect breakeven and how?

Answer rating: 100% (QA)

Solutions Variable cost relative to the numbers of rafters Variable Cost Total Per Unit Meals provid... View the full answer