Check my work 1
The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in
its budgeting and performance reports-the number of courses and the total number of students. For example, the school might run
two courses in a month and have a total of 62 students enrolled in those two courses. Data concerning the company's cost formulas
appear below:
20
points
Cost per
Fixed Cost Cost per
per Month
Course
$ 2,910
Student
$ 290
eBook
Instructor wages
Classroom supplies
Utilities
Campus rent
Insurance
Administrative expenses
$
70
Print
$ 1,240
$ 4,600
$ 2,000
$ 3,700
References
$
43
$ 7
For example, administrative expenses should be $3,700 per month plus $43 per course plus $7 per student. The company's sales
should average $890 per student.
The company planned to run four courses with a total of 62 students; however, it actually ran four courses with a total of only 56
students. The actual operating results for September appear below:
Revenue
Instructor wages
Classroom supplies
Utilities
Actual
$ 52,280
$ 10,920
$ 17,830
$ 1,930
Mc
Graw
Hill
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Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?