1 answer

Question one 4 points) Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore....

Question:

Question one 4 points) Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determine
Question two 6 points) Marwicks Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level.
Question one 4 points) Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11.4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13.4 cents per kilometer. Required: 1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation 2. If a truck were driven 80,000 kilometers during a year, what total cost would you expect to be incurred? - $ 11,970 bal annual cost= (High Kelemben é no longer cost -105,000 X 0.114 al annual cost-Clowest loweskitan X achwage operating =70,000 X 0.134
Question two 6 points) Marwick's Pianos, Inc., purchases pianos from a large manufacturer and sells them at the retail level. The pianos cost, on the average, $2,400 each from the manufacturer. Marwick's Pianos, Inc., sells the pianos to its customers at an average price of $3,000 each. The selling and administrative costs that the company incurs in a typical month are presented below: Costs Cost Formula Selling: Advertising ...... $700 per month Sales salaries and commissions ...... $950 per month, plus 8% of sales Delivery of pianos to customers ...... $30 per piano sold Utilities ....... $350 per month Depreciation of sales facilities . . . . . . . . $800 per month Administrative: Executive salaries ......... $2,500 per month Insurance $400 per month $1,000 per month, plus $20 per piano sold Depreciation of office equipment...... $300 per month During August, Marwick's Pianos, Inc., sold and delivered 40 pianos. Required: Prepare an income statement for Marwick's Pianos, Inc., for August. Use the contribution format, with costs organized by behavior. Marwick's Pianos, Inc. Contribution Format Income Statement total pon piing For the Month of August total en 3 125

Answers

Answer to question one

  1. High-Low method -

Particulars

Kilometers driven

Cost per Kilometer

Total Annual Cost

(a)

(b)

(c) = (a) x (b)

High level of activity

  105,000.00

                     0.114

             11,970.00

Low level of activity

             70,000.00

                     0.134

               9,380.00

Change

             35,000.00

               2,590.00

  1. Variable cost per kilometer         =             2,590/35,000

=             0.074

  1. Fixed cost = Total cost less Variable cost

Cost for 105,000 kilometers:

Total cost             =             11,970.00 (as mentioned in the above table)

Variable cost      =             7,770.00 (105,000 Kilometers x 0.074)

Fixed Cost           =             4,200.00 (11,970.00 – 7,770.00)

Therefore, the variable cost per kilometer is 0.074 and total fixed cost is 4,200.00.

  1. If a truck were driven 80,000 kilometers during a year, then total cost to be incurred:

  1. Total variable cost    =             80,000 x 0.074

                              =             5,920.00

  1. Total fixed cost        =             4,200.00 (as mentioned above)
  2. Total cost (a + b)    =             5,920.00 + 4,200.00 = 10,120.00
.

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