# Hos 372 Chapter 7 Homework Assignment 2015

7. 1 Differentiate between a direct cost and an indirect cost. 7. 3 Differentiate between a fixed cost and a variable cost and give an example of each that isnot in the text. 7. 4 Why are some costs known as semifixed or semivariable?7. 7 Explain why it sometimes makes sense to sell below total cost. 7. 8 Define the term high operating leverage and explain why in times of increasing salesrevenue it is more profitable to have high rather than low operating leverage. Chapter Seven – Exercises (Pg. 322-323)E7. 1 If sales revenue is \$6,800 and variable costs are \$2,856, what is the variable costpercentage?SalesVariable costVariable rate\$6,800\$2,85642. 0%Variable Cost Formula: E7. 2 If sales revenue is \$48,840 and variable costs are 43% what is the dollar contributionmargin?SalesVariable costContribution in dollars\$48,84043. 0%\$4,070. 0Dollar Contribution Formula: E7. 3 You are asked to cater a buffet for 70 people at \$18/person. Your variable cost is 68% andfixed costs are \$100 per day. Calculate contribution margin in dollars and operating income. Should you accept?Customer countPriceVariable costFixed cost70\$18. 0068%\$100. 00RevenueVariable cost at 68%Contribution marginFixed costOperating income\$1,260857403100303E7. 5 Use the High-Low Method with the following data to determine the variable cost per guestand the total fixed costs, using both the high and the low data to confirm calculations. MaximumMinimumDifference or ?Guests18,00012,0006,000Variable Cost per Guest

# Hos 372 Chapter 7 Homework Assignment 2015

7. 1 Differentiate between a direct cost and an indirect cost. 7. 3 Differentiate between a fixed cost and a variable cost and give an example of each that isnot in the text. 7. 4 Why are some costs known as semifixed or semivariable?7. 7 Explain why it sometimes makes sense to sell below total cost. 7. 8 Define the term high operating leverage and explain why in times of increasing salesrevenue it is more profitable to have high rather than low operating leverage. Chapter Seven – Exercises (Pg. 322-323)E7. 1 If sales revenue is \$6,800 and variable costs are \$2,856, what is the variable costpercentage?SalesVariable costVariable rate\$6,800\$2,85642. 0%Variable Cost Formula: E7. 2 If sales revenue is \$48,840 and variable costs are 43% what is the dollar contributionmargin?SalesVariable costContribution in dollars\$48,84043. 0%\$4,070. 0Dollar Contribution Formula: E7. 3 You are asked to cater a buffet for 70 people at \$18/person. Your variable cost is 68% andfixed costs are \$100 per day. Calculate contribution margin in dollars and operating income. Should you accept?Customer countPriceVariable costFixed cost70\$18. 0068%\$100. 00RevenueVariable cost at 68%Contribution marginFixed costOperating income\$1,260857403100303E7. 5 Use the High-Low Method with the following data to determine the variable cost per guestand the total fixed costs, using both the high and the low data to confirm calculations. MaximumMinimumDifference or ?Guests18,00012,0006,000Variable Cost per Guest

# HOS 372 Chapter 7 Homework Assignment 2015

Question
7.1 Differentiate between a direct cost and an indirect cost.

7.3 Differentiate between a fixed cost and a variable cost and give an example of each that is
not in the text.

7.4 Why are some costs known as semifixed or semivariable?

7.7 Explain why it sometimes makes sense to sell below total cost.

7.8 Define the term high operating leverage and explain why in times of increasing sales
revenue it is more profitable to have high rather than low operating leverage.

Chapter Seven – Exercises (Pg. 322-323)
E7.1 If sales revenue is \$6,800 and variable costs are \$2,856, what is the variable cost
percentage?
Sales
Variable cost
Variable rate

\$6,800
\$2,856
42.0%

Variable Cost Formula:

E7.2 If sales revenue is \$48,840 and variable costs are 43% what is the dollar contribution
margin?
Sales
Variable cost
Contribution in dollars

\$48,840
43.0%
\$4,070.0

Dollar Contribution Formula:

E7.3 You are asked to cater a buffet for 70 people at \$18/person. Your variable cost is 68% and
fixed costs are \$100 per day. Calculate contribution margin in dollars and operating income.
Should you accept?
Customer count
Price
Variable cost
Fixed cost

70
\$18.00
68%
\$100.00

Revenue
Variable cost at 68%
Contribution margin
Fixed cost
Operating income

\$1,260
857
403
100
303

E7.5 Use the High-Low Method with the following data to determine the variable cost per guest
and the total fixed costs, using both the high and the low data to confirm calculations.

Maximum
Minimum
Difference or ?

Guests
18,000
12,000
6,000

Variable Cost per Guest