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Question: Classical Glasses operates a kiosk at the


Classical Glasses operates a kiosk at the local mall, selling sunglasses for $30 each. Classical Glasses currently pays $1,000 a month to rent the space and pays two full-time employees to each work 160 hours a month at $10 per hour. The store shares a manager with a neighboring kiosk and pays 50% of the manager’s annual salary of $60,000 and benefits of $12,000. The wholesale cost of the sunglasses to the company is $10 a pair.

Required:
1. How many sunglasses does Classical Glasses need to sell each month to break even?
2. If Classical Glasses wants to earn an operating income of $5,300 per month, how many sunglasses does the store need to sell?
3. If the store’s hourly employees agreed to a 15% sales-commission-only pay structure, instead of their hourly pay, how many sunglasses would Classical Glasses need to sell to earn an operating income of $5,300?
4. Assume Classical Glasses pays its employees hourly under the original pay structure, but is able to pay the mall 10% of its monthly revenue instead of monthly rent. At what sales levels would Classical Glasses prefer to pay a fixed amount of monthly rent, and at what sales levels would it prefer to pay 10% of its monthly revenue as rent?



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> What are some additional considerations that arise when budgeting in multinational companies?

> Explain how the choice of the type of responsibility center (cost, revenue, profit, or investment) affects behavior.

> Describe how nonoutput-based cost drivers can be incorporated into budgeting.

> What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict?

> How can sensitivity analysis be used to increase the benefits of budgeting?

> What are the four elements of the budgeting cycle?

> Department indirect-cost rates are never activity-cost rates.” Do you agree? Explain.

> What are the key reasons for product cost differences between simple costing systems and ABC systems?

> Why is it important to classify costs into a cost hierarchy?

> Describe four levels of a cost hierarchy.

> What is costing system refinement? Describe three guidelines for refinement.

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> What are the main costs and limitations of implementing ABC systems?

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> Describe four signs that help indicate when ABC systems are likely to provide the most benefits.

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> Define cost pool, cost tracing, cost allocation, and cost-allocation base.

> Describe sensitivity analysis. How has the advent of the electronic spreadsheet affected the use of sensitivity analysis?

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> Describe three methods that managers can use to express CVP relationships.

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> Describe the assumptions underlying CVP analysis.

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> Give an example of how a manager can increase variable costs while decreasing fixed costs.

> Give an example of how a manager can decrease variable costs while increasing fixed costs.

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