# I am having a hard time doing this and this is Hospitality

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I am having a hard time doing this and this is Hospitality managerial accounting HOS 372 Chapter 7 HW Template 2012.xls Chapter Seven – Discussion Questions (Pg. 321) 7.1 Differentiate between a direct cost and an indirect cost. 7.3 Differentiate between a fixed cost and a variable cost and give an example of each that is not in the text. 7.4 Why are some costs known as semifixed or semivariable? 7.7 Explain why it sometimes makes sense to sell below total cost. 7.8 Define the term high operating leverage and explain why in times of increasing sales revenue it is more profitable to have high rather than low operating leverage. Chapter Seven – Exercises (Pg. 322-323) E7.1 If sales revenue is \$6,800 and variable costs are \$2,856, what is the variable cost percentage? Sales Variable cost Variable rate \$6,800 \$2,856 42.0% Variable Cost Formula: E7.2 If sales revenue is \$48,840 and variable costs are 43% what is the dollar contribution margin? Sales Variable cost Contribution in dollars \$48,840 43.0% \$4,070.0 Dollar Contribution Formula: E7.3 You are asked to cater a buffet for 70 people at \$18/person. Your variable cost is 68% and fixed costs are \$100 per day. Calculate contribution margin in dollars and operating income. Should you accept? Customer count Price Variable cost Fixed cost 70 \$18.00 68% \$100.00 Revenue Variable cost at 68% Contribution margin Fixed cost Operating income \$1,260 857 403 100 303 E7.5 Use the High-Low Method with the following data to determine the variable cost per guest and the total fixed costs, using both the high and the low data to confirm calculations. Maximum Minimum Difference or Δ Guests 18,000 12,000 6,000 Variable Cost per Guest Labor Cost 25,500 18,000 7,500 Three steps of the High-Low Method: \$1.25 Maximum Labor Cost Variable Cost for High Data Fixed Cost 25,500 22,500 3,000 Minimum Labor Cost Variable Cost for Low Data Fixed Cost 18,000 15,000 3,000 If your answer is correct the fixed cost computation must be the same for high and low E7.8 You are offered a five year lease at a fixed cost of \$42,000 per year or a variable lease rate equal to 10% of revenue. Sales are projected to be \$505,000. Find the indifference point and determine which lease offer you would accept. Fixed lease cost Variable lease rate Sales projection Indifference point \$42,000 10% \$505,000 \$420,000 Which option would you choose and why? Indifference Point Formula: Chapter Seven – Problems (Pg. 323-324) P7.1 Using the concept of relevant costs over a five year period, which model is the lowest cost alternative? Cost Estimated life Trade In value after 5 years Cash from sale of current machine Installation cost Training cost Annual labor cost Annual maintenance cost Annual supplies cost Total Relevant One-Time Costs Total Relevant Annual Costs Total Relevant Five Year Costs Recommendation: Model A \$5,000 5 years 1,000 200 80 350 32,000 275 175 Model B \$5,500 5 years 1,200 200 120 300 32,000 300 225 Model C \$5,300 5 years 800 200 100 325 32,000 250 200 Relevant? Chapter Seven – Problems (Pg. 324) P7.2 Fixed costs of the banquet unit are \$350/day. An event for 100 guests has a food cost of \$6.50/person, labor costs of \$2.75/person and other variable costs of \$1.25/person a. Calculate the total cost per person at this event Total Fixed Costs Food/guest Labor/guest Other costs/guest Total Variable Cost/Guest Fixed Cost per Guest Total Cost per Guest \$350 6.50 2.75 1.25 10.50 3.50 \$14.00 b. What should the total price and total price per person be if a 20% operating income is desired? Price Per Guest (20% margin) Total Revenue (20% margin) \$0.80 \$18 c. Customer is a regular and does not want to pay more than \$13.75/person. No other event could be booked. What are the comparative costs? Would you accept that price?. Total Revenue Food Cost Variable Wage Other Variable Costs Fixed Costs Total Cost Net Loss Recommendation: Function accepted at \$13.75 1,375 1,050 325 Function not accepted Ch

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