Vinita ramaswamy recently acquired wild country air wild

Assignment Help Accounting Basics

Reference no: EM13590926

Vinita Ramaswamy recently acquired Wild Country Air. Wild Country has been in business for many years, and provides charter flights for remote fishing and camping enthusiasts. When the company originally started into business, aircraft, insurance, and fuel were relatively inexpensive. Pilot salaries were by far the most significant cost factor and have continued to be used as the basis for allocating overhead.

Heretofore, the company has classified all costs, other than pilot salaries, as overhead. The company prices trips to customers at 125% of ""cost."" Vinita is concerned about the appropriateness of the costing/pricing technique and has engaged you to study this issue, with a goal of improving Wild Country's overall operations."

Aggregated data for the most recent year are:

Pilot salaries* $140,000
Aircraft depreciation (4,500 engine hours) 450,000
Insurance (fixed annual cost) 250,000
Fuel ($7 per gallon) 630,000
Other costs 70,000

* Includes amounts paid for "wait time" that varies considerably by trip.

Sample data from three specific recent flights are as follows:

Flight A: $200 pilot salaries, 3 engine hours on flight, 60 gallons of fuel used.
Flight B: $350 pilot salaries, 1 engine hours on flight, 20 gallons of fuel used.
Flight C: $225 pilot salaries, 9 engine hours on flight, 180 gallons of fuel used.

(a) Using the existing scheme, determine the overhead application rate and price for Flights A, B, and C.

(b) Is "job" costing appropriate for a "nonmanufacturing" business like Wild Country?

(d) Using engine hours to allocate overhead, and classifying pilot salaries as direct labor and fuel as a direct materials cost, prepare a revised pricing schedule for the three flights (continue to assume that flights are priced at 125% of cost).

(e) If pricing is revised as described in part (d), what is the likely result on profits?

(f) If Vinita indicates that she wishes to build a "lean" organization, to what is she generally referring?

(g) Obviously, safety and quality are important features of air transport. If Vinita embraces "six sigma" concepts, what is her general objective for Wild Country?

Reference no: EM13590926

Questions Cloud

At the main street theater the cashier located in a box : at the main street theater the cashier located in a box office at the entrance receives cash from customers and

Joyce is a single cash-method taxpayer on april 11 2009 : joyce is a single cash-method taxpayer. on april 11 2009 joyce paid 120 with her 2008 state income tax return. during

The premium per 1000 was 356 she will be 45 years old this : keena williams took out a 100000 5-year term policy at age 40. the premium per 1000 was 3.56. she will be 45 years

What is the ratio of the maximum radial force on the : the spin cycles of a washing machine have two angular speeds 423 revmin and 640 rev min. the internal diameter of the

Vinita ramaswamy recently acquired wild country air wild : vinita ramaswamy recently acquired wild country air. wild country has been in business for many years and provides

Our sun is 23 x 104 ly light-years from the center of our : our sun is 2.3 x 104 ly light-years from the center of our milky way galaxy and is moving in a circle around that

Joyce is a single cash-method taxpayer on april 11 2009 : joyce is a single cash-method taxpayer. on april 11 2009 joyce paid 120 with her 2008 state income tax return.during

Select a current price that you have seen or paid recently : to complete the following assignment go to this weeks final project link in the left navigation. focus of the final

You are in a job interview and your possible employer asks : you are in a job interview and your possible employer asks you to describe the differences between the flexible and the

User Account

All Pages