Analyze cost behaviors and decision-making scenarios using the linear

For this week’s Application
Assignment, you will analyze cost behaviors and decision-making scenarios using
the linear profit model. In a Word document, complete the exercises below and
submit your responses per the instructions that follow.

Darien Industries

Darien Industries
operates a cafeteria for its employees. The operation of the cafeteria requires
fixed costs of $4,700 per month and variable costs of 40 percent of sales.
Cafeteria sales are currently averaging $12,000 per month.

Darien has an
opportunity to replace the cafeteria with vending machines. Gross customer
spending at the vending machines is estimated to be 40 percent greater than
current sales because the machines are available at all hours. By replacing the
cafeteria with vending machines, Darien would receive 16 percent of the gross
customer spending and avoid all cafeteria costs. How much does monthly
operating income change if Darien Industries replaces the cafeteria with
vending machines?

Used by permission of
McGraw-Hill.

Silky Smooth Lotions

Silky Smooth lotions
come in three sizes: 4, 8, and 12 ounces. The following table summarizes the
selling prices and variable costs per case of each lotion size.

Fixed costs are
$771,000. Current production and sales are 2,000 cases of 4-ounce bottles;
4,000 cases of 8-ounce bottles; and 1,000 cases of 12-ounce bottles, Silky
Smooth typically sells the three lotion sizes in fixed proportions as
represented by the preceding sales amounts.

Required:

How many cases of 4-,
8-, and 12-ounce lotion bottles must be produced and sold for Silky Smooth to
break even, assuming that the three sizes are sold in fixed proportions?

Used by permission of
McGraw-Hill.

J. P. Max Department
Stores

J. P. Max is a
department store carrying a large and varied stock of merchandise. Management
is considering leasing part of its floor space for $72 per square foot per year
to an outside jewelry company that would sell merchandise. Two areas currently
in use are being considered: home appliances (1,000 square feet) and
televisions (1,200 square feet). These departments had annual profits of
$64,000 for appliances and $82,000 for televisions after allocated fixed
occupancy costs of $7 per square foot were deducted. Allocated fixed occupancy
costs include property taxes, mortgage interest, insurance, and exterior
maintenance for the department store.

Required:

Considering all the
relevant factors, which department should be leased and why?

Used by permission of
McGraw-Hill.

Bidwell Company

Data for the Bidwell
Company are as follows:

Required:

Based on the
preceding data, calculate break-even sales in units.
If Bidwell Company
is subject to an effective income tax rate of 40 percent, calculate the number
of units Bidwell would have to sell to earn an after-tax profit of $90,000.
If fixed costs
increase $31,500 with no other cost or revenue factors changing, calculate the
break-even sales in units.

The numbers for Silky and Bidwell is attached

Attachments
4234977-6120wk1.docx