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Flexible budget Tom's Shoe Repair provides a variety of shoe repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination: Supplies y=$0+ $4.00x Production supervision and direct labor y = $500 + $7.00X Utilities y=$350 + $5.40X Rent y $450+ $0.00X Advertising y=$75 + $0.00x a. Prepare a flexible budget at 500, 600, 700, and 800 direct labor hours. Variable costs: Supplies $4.00 per DLH Direct labor@ $7.00 per DLH Utilities @ $5.40 per DLH Fixed costs: Direct labor Utilities Rent 5 500 500 S 600 600 Advertising Total cost $ S $ b. Calculate a total cost per direct labor hour at each level of activity. Round amounts to two decimal places. 700 700 1 $ 800 800 Cost per DLH $ $ $ c. Tom's employees usually work 700 direct labor hours per month. The average shoe repair requires 1.25 labor hours to complete. Tom wants to earn a 40 percent margin on his cost. What should be the average charge per customer, rounded to the nearest dollar to achieve Tom's profit objective?

Flexible budget Tom's Shoe Repair provides a variety of shoe repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination: Supplies y=$0+ $4.00x Production supervision and direct labor y = $500 + $7.00X Utilities y=$350 + $5.40X Rent y $450+ $0.00X Advertising y=$75 + $0.00x a. Prepare a flexible budget at 500, 600, 700, and 800 direct labor hours. Variable costs: Supplies $4.00 per DLH Direct labor@ $7.00 per DLH Utilities @ $5.40 per DLH Fixed costs: Direct labor Utilities Rent 5 500 500 S 600 600 Advertising Total cost $ S $ b. Calculate a total cost per direct labor hour at each level of activity. Round amounts to two decimal places. 700 700 1 $ 800 800 Cost per DLH $ $ $ c. Tom's employees usually work 700 direct labor hours per month. The average shoe repair requires 1.25 labor hours to complete. Tom wants to earn a 40 percent margin on his cost. What should be the average charge per customer, rounded to the nearest dollar to achieve Tom's profit objective?

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 26BEB: Variable Cost Ratio, Contribution Margin Ratio Chillmax Company plans to sell 3,500 pairs of shoes...
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Flexible budget Tom's Shoe Repair provides a variety of shoe repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination: Supplies y = $0+ $4.00X Production supervision and direct labor y = $500 + $7.00x Utilities y = $350 + $5.40X Rent y=$450+ $0.00x y=$75 + $0.00x Advertising a. Prepare a flexible budget at 500, 600, 700, and 800 direct labor hours. Variable costs: Supplies @ $4.00 per DLH $ Direct labor @ $7.00 per DLH Utilities @ $5.40 per DLH Fixed costs: Direct labor Utilities Rent Advertising Total cost 500 500 S 600 S 600 $ $ $ $ b. Calculate a total cost per direct labor hour at each level of activity. Round amounts to two decimal places. 700 700 $ 800 800 Cost per DLH $ $ $ c. Tom's employees usually work 700 direct labor hours per month. The average shoe repair requires 1,25 labor hours to complete. Tom wants to earn a 40 percent margin on his cost. What should be the average charge per customer, rounded to the nearest dollar to achieve Tom's profit objective? $
Transcribed Image Text:Flexible budget Tom's Shoe Repair provides a variety of shoe repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination: Supplies y = $0+ $4.00X Production supervision and direct labor y = $500 + $7.00x Utilities y = $350 + $5.40X Rent y=$450+ $0.00x y=$75 + $0.00x Advertising a. Prepare a flexible budget at 500, 600, 700, and 800 direct labor hours. Variable costs: Supplies @ $4.00 per DLH $ Direct labor @ $7.00 per DLH Utilities @ $5.40 per DLH Fixed costs: Direct labor Utilities Rent Advertising Total cost 500 500 S 600 S 600 $ $ $ $ b. Calculate a total cost per direct labor hour at each level of activity. Round amounts to two decimal places. 700 700 $ 800 800 Cost per DLH $ $ $ c. Tom's employees usually work 700 direct labor hours per month. The average shoe repair requires 1,25 labor hours to complete. Tom wants to earn a 40 percent margin on his cost. What should be the average charge per customer, rounded to the nearest dollar to achieve Tom's profit objective? $
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