Question

Woolman College is considering the construction of a new women’s dormitory. The dormitory will have 80...

Woolman College is considering the construction of a new women’s dormitory. The dormitory will have 80 rooms and the ability to accommodate three students per room. Woolman estimates the dormitory will cost $1.8 million and will have a useful life of 30 years with no salvage value. Using information from existing dorms, Woolman knows the following about each cost:

A linear regression was performed for utility costs (dependent variable) and housing revenue (independent variable), with an adjusted R2 = 0.5. In a separate regression to determine causation they found a total cost function for utility costs with a y-intercept of 22,000 and an x-coefficient of 0.05. All historical data were annual amounts.          

Supplies                       =          $ 350 / student (per year)

Insurance                     =          $ 40,000 / year

Repair and Maint.         =          $ 32,000 / year

Resident assistants – One resident assistant is needed for every 45 students. Each resident assistant is paid $7,000 / year in salary.

Given the above information, please answer the following information.

If Woolman charges $ 3,100 / student for annual housing in the dormitory, what is the contribution margin per student?

Prepare a contribution margin income statement to show the profit generated from this new dorm if it is 60% full? If it is 80% full?

What is the cost per student (including variable and fixed costs) at 60% capacity? At 80% capacity?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

IF WOOLMEN CHARGES $3100 PER STUDENT,THEN CONTRIBUTION PER STUDENT=

CHARGES PER STUDENT =$3100

LESS:VARIABLE COST

SUPPLIES ($350)

ASSISTANT SALARY ($155)

($7000/45)

CONTRIBUTION $2595

PARTICULARS @60% @80%
CHARGES TAKEN PER STUDENT $446400 $595200
LESS:VARIABLE COSTS-SUPPLIES $350/-PER STUDENT ($50400) ($67200)
ASSISTANT COST ($28000) ($35000)
CONTRIBUTION $368,000 $493000

LESS:FIXED EXPENSES

DEPERICIATION(1.8 MILLION/30)

INSURANCE

REPAIR AND MAINTAINANCE

PROFIT

($60000)

($40000)

($32000)

$236000

($60000)

($40000)

($32000)

$361000

COST PER STUDENT:

SUPPLIES $350

OFFICE ASS.($7000/45) $155

INSURANCE ($40000/240*) $167

REPAIR ($32000/240) $133

AND MAINTAINACE

DEP. ($60000/240) $250

TOTAL $1055

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced...
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.10. The machine will increase fixed costs by $12,800 per year. The information they will use to consider these changes is shown here. A. What will the impact be on the break-even point if Flanders purchases the new machinery? Round per unit cost answers to two decimal places. Current New Machine Units Sold 217,000 Sales Price Per Unit $2.15 $ Variable Cost Per...
Darby Company, operating at full capacity, sold 98,550 units at a price of $123 per unit...
Darby Company, operating at full capacity, sold 98,550 units at a price of $123 per unit during the current year. Its income statement for the current year is as follows: Sales $12,121,650 Cost of goods sold 5,986,000 Gross profit $6,135,650 Expenses: Selling expenses $2,993,000 Administrative expenses 2,993,000 Total expenses 5,986,000 Income from operations $149,650 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50%...
immaculate heart school is considering introducing a discount program for children of faculty that would reduce...
immaculate heart school is considering introducing a discount program for children of faculty that would reduce tuition by 80% or 90% of the full $10,000 amount. For each new student this program attracts, the incremental cost to the school is $1,500 per student. A. assuming this is an extent problem, are either of these proposals (80% off or 90% off tuition) a wise choice for the school financially? explain in detail, including appropriate calculations. B. what is the tuition per...
The 40-room limited-service Residence Inn has an ADR of $80 and variable costs per room sold...
The 40-room limited-service Residence Inn has an ADR of $80 and variable costs per room sold of $60. Assume there is no other sales activity. Its annual fixed costs total $180,000. If they desire their property to generate a pretax profit of $100,000, how many rooms must be sold? What is the occupancy percentage for the Inn when pretax profit earned is $100,000? Determine the Contribution margin (CM). If the Inn sells only 7,000 rooms, the loss for the year?...
Bobby Co. sells two products, X and Y. Last year, Bobby sold 18,000 units of X's...
Bobby Co. sells two products, X and Y. Last year, Bobby sold 18,000 units of X's and 12,000 units of Y's. The unit selling price, variable cost per unit, and contribution margin per unit for the company’s two products are provided below. Product Selling Price Variable Cost per unit Contribution Margin per unit X $180 $100 $80 Y $100 $60 $40 Assuming that last year’s fixed costs totaled $160,000. What was Bobby Co's break-even point in units of enterprise product...
Imagine that you have just started working at Heartland Watches, a manufacturer of women’s wristwatches. Heartland...
Imagine that you have just started working at Heartland Watches, a manufacturer of women’s wristwatches. Heartland Watches was founded by John A.F. Whitney in 1974 in Kansas. After John Whitney’s passing in 1992, his eldest daughter Marianne Whitney served as the company’s president. Following is the income statement of Heartland Watches for the last fiscal year. Heartland Watches Income Statement for the Year Ended December 31, 2016 Sales $40,000,000 Less: Cost of goods sold $22,000,000 Gross Margin $18,000,000 Less: Selling...
Charlie Corporation is considering buying a new donut maker. This machine will replace an old donut...
Charlie Corporation is considering buying a new donut maker. This machine will replace an old donut maker that still has a useful life of 6 years. The new machine will cost $3,780 a year to operate, as opposed to the old machine, which costs $4,250 per year to operate. Also, because of increased capacity, an additional 21,800 donuts a year can be produced. The company makes a contribution margin of $0.10 per donut. The old machine can be sold for...
ntos Company is considering introducing a new compact disc player model at a price of $...
ntos Company is considering introducing a new compact disc player model at a price of $ 105 $105 per unit. Santos Santos​'s controller has compiled the following incremental cost information based on an estimate of 120 comma 000 120,000 units of sales annually for the new​ product: Direct materials cost $ 3,600,000 Direct labor cost $ 2,400,000 Variable manufacturing overhead $ 1,200,000 Sales commission 10% of sales Fixed cost $ 2,000,000 The sales manager expects the introduction of the new...
Samantha and Baxter start a business that manufactures cutting tools. They sell the tools for $80...
Samantha and Baxter start a business that manufactures cutting tools. They sell the tools for $80 each. Their monthly fixed costs are $3800 for the building lease and utilities and $2800 for salaries. The cost of supplies for each tool is $12. a. To break even, how many tools do they have to sell every month? b.If the cost of supplies for each tool is reduced to $10 and they hire one more person for $2000 per month, calculate the...
Break-Even Sales Under Present and Proposed Conditions Battonkill Company, operating at full capacity, sold 109,100 units...
Break-Even Sales Under Present and Proposed Conditions Battonkill Company, operating at full capacity, sold 109,100 units at a price of $102 per unit during the current year. Its income statement for the current year is as follows: Sales $11,128,200 Cost of goods sold 3,944,000 Gross profit $7,184,200 Expenses: Selling expenses $1,972,000 Administrative expenses 1,190,000 Total expenses 3,162,000 Income from operations $4,022,200 The division of costs between fixed and variable is as follows: Fixed Variable Cost of goods sold 40% 60%...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT