The Heavy Breezes Hotel & Spa located in Hanalei, Hawai currently provides a complementary massage to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The Heavy Breezes Hotel & Spa located in Hanalei, Hawai currently provides a complementary massage to each of its 40,000 annual guests. An average of 25 percent of its guests accept the offer and receive a massage. However, a small startup venture in the same village recently offered to provide a massage to each of Heavy Breezes' guests for a fee to Heavy Breezes of $100 per massage. Heavy Breezes accounting team has prepared the following list of costs it incurs to provide its guests with massages: Total Cost Unit Cost Direct materials (towels, water) $80,000 s8 Direct labor (masseuse time) S900,000 $90 Variable overhead (oils, lotions) $50,000 $5 Fixed overhead (physical facility in hotel) $500,000 $50 Total $1,530,000 $153 Fixed overhead will continue whether the massages are provided internally by Heavy Breezes personnel or externally by the startup venture. No additional costs beyond the $100 will be incurred if Heavy Breezes uses the new startup venture to provide the guest massages. Heavy Breezes management must determine if it would be cheaper to provide the guest massages internally or externally. Senior management wants customers to retain consistent experience, and a combination of using internal resources and outsourcing to provide the massage service is not an option. Required: 1. What are the alternatives that are being considered for Heavy Breezes massages. Check all that apply. O A combination of using internal Heavy Breezes' resources and the external startup venture company V O Continue to provide guest massages internally using Heavy Breezes' resources V V Purchase the massages for guests externally by using the new startup venture company K Points: 1/1 2. List the relevant cost(s) (in total costs) of internally provided massages and of externally provided massages. Enter all amounts as positive numbers. Alternatives Differential Make Buy Cost to Make Direct materials 24 $ Direct labor $ Variable overhead $ Purchase cost $ Total relevant cost $ S Points: 0/ 11 3. Which alternative is more cost effective and by how much? It is less expensive v by $ to purchase (or outsource) V the guest massages. K Points 2/3 4. Assume that the direct labor costs of providing the service internally is now changed to $800,000 instead of the original estimate of $900,000. Senior management also believes that there is a possibility that Heavy Breezes can provide a different health treatment to its existing customers using the existing facility in which they plan to provide the massage service. This health treatment should bring in an incremental profit of $200,000 for Heavy Breezes. The Heavy Breezes Hotel & Spa located in Hanalei, Hawai currently provides a complementary massage to each of its 40,000 annual guests. An average of 25 percent of its guests accept the offer and receive a massage. However, a small startup venture in the same village recently offered to provide a massage to each of Heavy Breezes' guests for a fee to Heavy Breezes of $100 per massage. Heavy Breezes accounting team has prepared the following list of costs it incurs to provide its guests with massages: Total Cost Unit Cost Direct materials (towels, water) $80,000 s8 Direct labor (masseuse time) S900,000 $90 Variable overhead (oils, lotions) $50,000 $5 Fixed overhead (physical facility in hotel) $500,000 $50 Total $1,530,000 $153 Fixed overhead will continue whether the massages are provided internally by Heavy Breezes personnel or externally by the startup venture. No additional costs beyond the $100 will be incurred if Heavy Breezes uses the new startup venture to provide the guest massages. Heavy Breezes management must determine if it would be cheaper to provide the guest massages internally or externally. Senior management wants customers to retain consistent experience, and a combination of using internal resources and outsourcing to provide the massage service is not an option. Required: 1. What are the alternatives that are being considered for Heavy Breezes massages. Check all that apply. O A combination of using internal Heavy Breezes' resources and the external startup venture company V O Continue to provide guest massages internally using Heavy Breezes' resources V V Purchase the massages for guests externally by using the new startup venture company K Points: 1/1 2. List the relevant cost(s) (in total costs) of internally provided massages and of externally provided massages. Enter all amounts as positive numbers. Alternatives Differential Make Buy Cost to Make Direct materials 24 $ Direct labor $ Variable overhead $ Purchase cost $ Total relevant cost $ S Points: 0/ 11 3. Which alternative is more cost effective and by how much? It is less expensive v by $ to purchase (or outsource) V the guest massages. K Points 2/3 4. Assume that the direct labor costs of providing the service internally is now changed to $800,000 instead of the original estimate of $900,000. Senior management also believes that there is a possibility that Heavy Breezes can provide a different health treatment to its existing customers using the existing facility in which they plan to provide the massage service. This health treatment should bring in an incremental profit of $200,000 for Heavy Breezes.
Expert Answer:
Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
Posted Date:
Students also viewed these accounting questions
-
Orange Corporation distributes $200,000 in cash to each of its three shareholders: Sandy, Byron, and Fuchsia Corporation. What factors must be considered when determining how the distribution is...
-
Select appropriate letter to each of its related definition in the list given below. Definition A. Economic resources to be used or turned into cash within one year. B. Reports assets, liabilities,...
-
A small village has six people. Each can either fish in a nearby lagoon or work in a factory. Wages in the factory are $4/ day. Fish sell in competitive markets for $1 apiece. If L persons fish the...
-
From the densities of the lines in the mass spectrum of krypton gas, the following observations were made: Somewhat more than 50% of the atoms were krypton-84. The numbers of krypton-82 and...
-
Sales of digital cameras have been growing rapidly. However, most of this growth has occurred in the United States, Europe, and Japan. In anticipation of sales growth in other areas of the world,...
-
Reference frame S' passes reference frame S with a certain velocity as in Figure. Events 1 and 2 are to have a certain spatial separation x' according to the S' observer. However, their temporal...
-
What would happen to the SML graph in Figure 8.8 if expected inflation increased or decreased? Figure 8.8 268 269 270 271 272 273 274 275 A Required Rate of Return TH-13.0% SML: r, RF+RPM * b D E F H...
-
The Raab Company is expanding its production facilities to include a new product line, a sporty automotive tire rim. Tire rims can now be produced with little labor cost using new computerized...
-
. Conduct research and review the pricing models for Amazon Web Services and Microsoft's Azure. . How are they similar and how are they different?
-
Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows: Common Stock, $20 stated value...
-
solve the following equation x + y - 6x + 2y + 9 = 0
-
The graph of the formula in Exercises 131132 is shown. Use the graph to solve Exercises 133134. Identify your solution to Exercise 132 as a point on the graph. Data from exercise 132 In a round-robin...
-
Go to www.companyboardroom.com and find how many companies went "ex" on this day. What is the largest declared dividend? For the stocks going "ex" today, what is the longest time until the payable...
-
Go to the Web site of the Energy Information Administration, www.eia.doe.gov, and follow the links to find the current retail price of gasoline. How does the current price of regular gasoline compare...
-
The following information is taken from the records of the Kingland Manufacturing Company for the year ending 31 December 20X1. There were no beginning or ending inventories. 1. Prepare a...
-
On a hot summer day, your roommate suggests that you open the refrigerator to cool off your apartment. Choosing the entire apartment as the system, perform a fi rst-law analysis to decide whether...
-
apid changes in the business world have led to the need for entry-level auditing professionals to have proficiency in Blank______. Multiple choice question. data analytics and technology complex IRS...
-
You work as an operations consultant for a textile company. Your client has a well-established distribution system in the US market. The company has hundreds of stores and four distribution centers....
-
Blake Accounting Services has the following transactions. Its beginning work-in-process services account balance is zero. a. Purchased supplies costing $11,000 on account. b. Paid property tax,...
-
Montaigne Delivery Company has a truck that it wants to sell. The truck had an original cost of $60,000, was purchased three years ago, and was expected to have a useful life of eight years with no...
-
Refer to the data in PE 7-15. Determine (1) The cost of goods sold for the month and (2) The ending inventory balance for October 31 using the FIFO cost flow assumption. Data from PE 7-15 Pearcy...
-
Go to https://www.youtube.com/watch?v=Fp9m4GNwGng to view a brief video on the Brazilian Jet manufacturer Embraer and their use of Critical Chain Project Management for maintenance services. How has...
-
It is sometimes argued that state revenue generated by lotteries is different from tax revenue because people choose to buy lottery tickets. Compare three state revenue sources cigarette excise...
-
Suppose that the demand for personalized license plates and the marginal cost of production in a state is as shown in Figure 16.1. If all the profits go to the government and the state wants to...
Study smarter with the SolutionInn App