Assume a Papa John\'s restaurant has the following information available regardi
ID: 2330804 • Letter: A
Question
Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales:
Monthly sales in units 5,000 8,000 10,000 $15,000 $24,000 $30,000 Cost of food sold Wages and fringe benefits 4,350 4,560 4,700 Fees paid delivery help Rent on building Depreciation on equipmen 400 400 400 Utilities Supplies (soap, floor wax, etc.)150 80 200 1,300 2,080 2,600 1,300 1,300 1,300 750 840 900 1,500 1,500 1,500 Administrative costs Total $24,750 $34,860 $41,600 (a) Identify each cost as being variable, fixed, or mixed. Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Administrative costsExplanation / Answer
Variable cost per unit using the high low method = Difference in cost / Difference in units
Fixed cost = Total cost - (Number of units * Variable cost per unit)
(A)
Variable cost per unit is constant.
Total fixed cost is constant.
Mixed cost has both variable cost and fixed cost.
(B)
(C)
Total costs = Cost of goods sold + Wages and fringe benefits + Fees paid delivery help + Rent on building + Depreciation on equipment + Utilities + Supplies + Administrative costs
= (9,900*3) + [(9,900*0.07)+4,000] + (9,900*0.26) + 1,300 + 400 + [(9,900*0.03)+600] + [(9,900*0.01)+100] + 1,500
= 29,700 + 4,693 + 2,574 + 1,300 + 400 + 897 + 199 + 1,500
= 41,263
Variable cost per unit Fixed cost Cost of goods sold 3 [(24,000-15,0000)/(8,000-5,000)] Wages and fringe benefits 0.07 [(4,560-4,350)/(8,000-5,000)] 4,000 [4,350-(5,000*0.07)] Fees paid delivery help 0.26 [(2,080-1,300)/(8,000-5,000)] Utilities 0.03 [(840-750)/(8,000-5,000)] 600 [750-(5,000*0.03)] Supplies 0.01 [(180-150)/(8,000-5,000)] 100 [150-(5,000*0.01)]Related Questions
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