Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) Austin's Shooters, Inc. operates paintball course where customers can come to play paintball games and stage organized matches with their friends. Their accountant, Denny Dinsdale, has made income statement (presented below) depicting their first year's operating data in contribution margin format. News is not good, given loss of $30,000. Though, Denny describes that this is the reason that presentation is in this format. That is, Austin Douglas, owner and manager of Austin's Shooters, Inc. can utilize statement to find out what will occur next year given changes in volume.

Income Statement For the Year Ended December 31, 2004
Revenue:  
Admission fees (1,600 shooters) $80,000
Supplies and Concessions $24,000
Total Revenue ($65 per unit) $104,000
Variable Costs:  
Cost of supplies & Concessions Sold $14,000
Electricity (purchased per KWH) $30,000
Wages of Games Coordinators (DL) $40,000
Liability Insurance (based on # of customers) $10,000
Total Variable Costs $94,000
Contribution Margin $10,000
Fixed Costs:  
Depreciation - Bldg & Fixtures $12,000
Advertising $3,000
Heat and Light for Bldg. $5,000
Property Taxes $20,000
Total Fixed Costs $40,000
Operating Income $<30,000>

After careful review, Austin tells Denny that classifications are not all correct. Austin enumerates three issues as follows:

1. Electricity cost is simply for lighting rather large area of land for play at night and is always on after sunset regardless of how many shooters are on site.

2. Though wages of games coordinators are hourly, they are needed to be present during all working hours to help make sure safety of shooters. Number of workers is adequate for up to 4,000 customers annually.

3. As liability insurance amount is based on number of shooters it does differ with volume, but it only increases for increments of every extra 5,000 shooters. Volume is expected to increase to 2,500 shooters next year, but 5,000 shooters clearly exceed relevant range of expected operations for foreseeable future.

Denny has assured Austin that information is correct and that expenses are properly categorized.

Denny proposes that Austin must either try to ramp up capacity and operations or shut down. This suggestion is based on the fact that it would take 6,400 shooters to break even under current structure. Denny further argues that at 6,400 shooters, more workers would be required and liability insurance would double. Presently his numbers do not even comprise those increased costs. Austin claims he can break even at 2,134 shooters and at projected level of 2,500 shooters make decent profit. Which break even point and income/loss computaion is right?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M918735

Have any Question? 


Related Questions in Accounting Basics

Accounting questions1 if cash is 2345 in 20x2 and 3671 in

Accounting Questions 1. If Cash is $2,345 in 20X2 and $3,671 in 20X1, what is the percentage of increase or (decrease) from 20X1 to 20X2? A. 56.55%******* B. (56.55%) C. 36.12% D. (36.12%) 2. Gross profit by department a ...

Question 1based upon the material covered from the readings

Question #1 Based upon the material covered from the readings and/or videos from Week 8, highlight the three most important concepts you learned this week and how each of these concepts will help you in appreciating the ...

Accountingi for the month of january jims landscaping

Accounting I. For the month of January Jim's Landscaping Company has the following transactions: 1. Borrowed $5,000 from First National Bank on a note due in two years. 2. Received $12,500 cash from investors and issued ...

This assignment will assess the following learning

This assignment will assess the following learning outcomes: - Demonstrate the impact on the financial statements and the implication for different users of accounts of alternative ways of treating controversial accounti ...

Del gato clinic deposits all cash receipts on the day when

Del Gato Clinic deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on June 30, 2015, its Cash account shows a(n) $14,287 debit balance. Del Gato ...

1 if a bartender can somehow accumulate extra liquor and

1. If a bartender can somehow accumulate extra liquor, and does not register the extra drinks, which of these activities could be spotted by the analytical methods we studied? A. The bartender steals the extra liquor B. ...

The purpose of this comprehensive project is to use a

The purpose of this comprehensive project is to use a variety of resources to research a corporation. You will also prepare a written paper describing your corporation and summarizing the findings you have developed in t ...

Assignmentpart 11 which of the following would cause a

Assignment Part 1 1. Which of the following would cause a contra-asset to be credited and an expense debited? a. Recording an accrued expense b. Recording the consumption of supplies c. Recording the building depreciatio ...

Assignment question 1 -impulse pty ltd impulse is an

Assignment Question 1 - Impulse Pty Ltd (Impulse) is an entertainment system manufacturer that was established in 2005. Your audit firm King & Queen have been the auditor of Impulse since its formation. The audit report ...

Accounting assignmentthis project requires you to select a

Accounting Assignment This project requires you to select a business and analyze part of its accounting information system. You will focus on a selected business process, develop conclusions from your observations, and a ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen