Reference no: EM131560515

Problem 1 -

REQUIRED:  Various costs associated with different factory operations are given below.  Classify each cost as being either variable or fixed with respect to the number of units produced and sold by placing an X under Variable or Fixed.  Also indicate whether each cost is a selling or administrative cost OR a product cost by placing an X under Selling & Admin. Exp. or Product. Finally, for all identified Product costs only, classify each as Direct Materials, Direct Labor, or Overhead with an X under the appropriate heading.

Cost Item	Cost Behavior		Type of Cost		For Product Costs Only
	Variable	Fixed	Selling & Admin. Exp.	Product	Direct Material	Direct Labor	Mfg. Overhead
1.  Overtime paid to factory janitorial staff
2.  Insurance on a building used in producing Barbie dolls
3. Cost of workers painting wheelbarrows  that are sold
4.  The CFO's salary
5.  Water used to cool down factory machines
6.  Commissions paid to sales staff
7.  Fees paid to Google for advertising
8.  Sugar used in cake production
9.  Rent on a factory building
10. Lubricants needed for factory machines
11.  Cost of plastic case in which product is sold
12.  Shipping costs incurred from factory to customer
13.  Insurance costs on corporate headquarters
14.  Depreciation on factory lunchroom facilities
15.  Personnel costs of the purchasing department
16.   Salaries of factory janitorial staff
17. Cost of laborers assembling a product
18. Depreciation of air purification equipment used in the factory
19.  Wages paid to assembly line workers
20.  CEO's bonus

Problem 2 -

Starbucks owns and operates a restaurant, ABC.  His fixed costs are $21,000 per month.  He serves lunches and dinners.  The average total bill (excluding tax and tip) is $19 per customer meal.  Queen's present variable costs average $10.60 per meal.    

REQUIRED:

a. What is the break-even point in number of meals served per month?

b. How many meals must he serve to attain a profit before taxes of $8,400 per month?

c. Queen's rent and other fixed costs rise to a total of $29,925 per month and variable costs also rise to $12.50 per meal.  Queen decides to raise his average price to $23. His accountant, however, says that he will likely lose 10% of his customers. To offset the loss of customers, Queen decides to hire a pianist to play 4 hours a night at a cost of $2,000 per month. Assume that this will increase total monthly meals to 3,450.  What will Queen's profit be now?