Exercise 7.17 Single and Dual Charging Rates Jeff McMillan owns a small neighbor
ID: 2455254 • Letter: E
Question
Exercise 7.17 Single and Dual Charging Rates Jeff McMillan owns a small neighborhood shopping mall. Of the 10 store spaces in the building, seven are rented by boutique owners and three are vacant. Jeff has decided tha offering more services to stores in the mall would enable him to increase occupancy. He has decided to use one of the vacant spaces to provide, at cost, a gift-wrapping service to shops in the mall. The boutiques are enthusiastic about the new service. Most of them are staffed minimally, which means that every time they have to wrap a gift, phones go unanswered and other customers in line grow impatient. Jeff figured that the gift-wrapping service would incur the following costs: the store space would normally rent for $1,800 per month, part-time gift wrappers could be hired for $1,500 per month, and wrapping paper and ribbon would average $1.20 per gift. The boutique owners estimated the following number of gifts to be wrapped per month. Number of Gifts Wrapped per Month Store The Stationery Station Arts & Collectibles Kid-Sports Java Jim's Designer Shoes Cristina's Closet Alan's Drug and Sundries 400 100 75 20 130 100 After the service had been in effect for six months, Jeff calculated the following actual average monthly number of gifts wrapped for each of the stores. Actual Average Number of Gifts Wrapped per Month 160 420 240 10 50 200 450 Store The Stationery Station Arts & Collectibles Kid-Sports Java Jim's Designer Shoes Cristina's Closet Alan's Drug and SundriesExplanation / Answer
Solution :
store
no. Of gift wrapped per month (Estimated)
no. Of gift wrapped per month (actual)
The Stationery Station
175
160
Arts & Collectibles ... 400
400
420
Kid-Sports
100
240
Java Jims
75
10
Designer Shoes
20
50
Cristina’s Closet
130
200
Alan’s Drug and Sundries
100
450
1000
1530
1.a single charging rate, on a per-gift basis, to be charged to the shops
Fixed cost (1800+1500)/1000
3.3
Variable cost
1.2
single rate
4.50
Based on the shops’ actual number of gifts wrapped, how much would be charged to each shop using the single charging rate
store
total charge (actual *4.50)
The Stationery Station
720
Arts & Collectibles ... 400
1,890
Kid-Sports
1,080
Java Jims
45
Designer Shoes
225
Cristina’s Closet
900
Alan’s Drug and Sundries
2,025
2.dual charging rate
Store
total charge (FC+VC)
FC
(estimated *3.3)
VC
(actual *1.2)
The Stationery Station
770
578
192
Arts & Collectibles ... 400
1,824
1,320
504
Kid-Sports
618
330
288
Java Jims
260
248
12
Designer Shoes
126
66
60
Cristina’s Closet
669
429
240
Alan’s Drug and Sundries
870
330
540
5136
3300
1836
3. Rate Prefernce (Lower of the two will be preferred)
STORE
SINGLE
DUAL
SINGLE/DUAL ?
The Stationery Station
720
769.5
SINGLE
Arts & Collectibles ... 400
1890
1824
DUAL
Kid-Sports
1080
618
DUAL
Java Jims
45
259.5
SINGLE
Designer Shoes
225
126
DUAL
Cristina’s Closet
900
669
DUAL
Alan’s Drug and Sundries
2025
870
DUAL
store
no. Of gift wrapped per month (Estimated)
no. Of gift wrapped per month (actual)
The Stationery Station
175
160
Arts & Collectibles ... 400
400
420
Kid-Sports
100
240
Java Jims
75
10
Designer Shoes
20
50
Cristina’s Closet
130
200
Alan’s Drug and Sundries
100
450
1000
1530
1.a single charging rate, on a per-gift basis, to be charged to the shops
Fixed cost (1800+1500)/1000
3.3
Variable cost
1.2
single rate
4.50
Based on the shops’ actual number of gifts wrapped, how much would be charged to each shop using the single charging rate
store
total charge (actual *4.50)
The Stationery Station
720
Arts & Collectibles ... 400
1,890
Kid-Sports
1,080
Java Jims
45
Designer Shoes
225
Cristina’s Closet
900
Alan’s Drug and Sundries
2,025
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