312 cvp - 4.35 Cost function; breakeven; quality of information; relevant rangeLO2, 3 PDF

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4.35 Cost function; breakeven; quality of information; relevant rangeLO2, 3...

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Sera Sovite Tupuola ID#181117 Ms Sanita Ioapo HAC312 - Tutorial Questions for CVP Analysis 4.35 Cost function; breakeven; quality of information; relevant rangeLO2, 3 Oysters Away picks, shucks and packs oysters and then sells them wholesale to fine restaurants across the state. The statement of profit or loss for last year is as follows.

Pickers, shuckers and packers are employed on an hourly basis and can be laid off whenever necessary. Salespeople mostly deliver the product and are paid on a salaried basis. a.

Required Estimate the cost function for Oysters Away. Cost Fixed Variable Wages 100,000 Packing materials 20,000 Rent & insurance 25,000 Admin & selling 45,000 Total 70,000 120,000 VC per unit: $120,000/2000 cases = $60 Cost function: $70,000 ÷ $60 x Q

b.

What is the breakeven point in cases for Oysters Away? Breakeven point = 70,000 ÷ (100 – 60) = 1750 cases of oysters away

c.

The manager thinks that the entity will harvest and sell 3000 cases of oysters next year. Estimate the after-tax profit.

CMR d.

Oysters Away harvested and sold 2000 cases in each of the last several years. What does this suggest about the quality of the income information you calculated in part (c)? Describe reasons why the cost function developed for the relevant range up to 2000 cases might not hold for 2001 to 3000 cases...