Description
Case: Hilton
Product 101 Rent Property Taxes Propert Insurance Compensation Insurance Direct Labor Indirect Labor Power Light and heat Building Service Materials Supplies Repairs Total Production Cost Selling Expense General Administration Depreciation Interest Total Cost Less Other Income Actual Sales Profit or Loss Unit Sales(Cwt) 337 112 94 148 2321 792 40 27 18 1372 94 32 5387 1635 619 1014 94 8748 18 9279 550 996858
Product 102 417 133 106 115 1619 563 66 34 21 1251 126 40 4490 1215 345 1136 106 7294 14 6900 -380 712102
Product 103 365 78 103 88 1341 448 59 20 14 946 68 20 3548 917 346 713 102 5626 10 5202 -414 501276
Q1: If the company had dropped product 103 as of January 1, 2004, what effect would that action have had on the $158000 pro Total Cost Variable Cost Total Cost - Variable Cost (after dropping Product 103) Total Revenue (after dropping Product 103 ) Loss (After dropping Product 103 21224 2512
18712
16180
-2532
Q2: In January 2005, should the company reduce the price of product 101 from $9.41 to $8.64 ? Old Variable Cost New Variable Cost( increase in 5% for materials and supplies) 4007
4080.3
Old Contribution(when it sells 750000) New Contribution(when it sells 1000000)
3050.5 4559.7
Since the contribution incase of $8.64 is higher the company should decrease the price.
Q3: What is Hilton's most profitable product? Contribution Margin incase of Product 101 Contribution Margin incase of Product 102 Contribution Margin incase of Product 103
5272 3683 2680
So as seen from the contribution margin it is quite evident that Product 101 is the most profitable for the company.
Q4: What appears to have caused the return to profitable operations in the first 6 months of 2004 ? The Rent, Property Taxes, Property insurance,Indirect labour cost,selling expense, general administrative expense, depreciation and interests are the fixed costs which were appropriated to all the 3 products based on the production to get the standard costs. But the actual fixed xosts were the same irrespective of the production. Thus this resulted in variance of the expected costs Hence as the total cost tuned out lower than the standard cost which casued the profit.
Total Standard 1119 323 303 351 5281 1803 165 81 53 3569 288 92 13425 3767 1310 2863 302 21668 42 21381 -244
Total Actual 1021 307 278 348 5308 1721 170 83 50 3544 288 88 13206 3706 1378 2686 290 21224 42 21382 158
that action have had on the $158000 profit for the first 6 months of 2004 ?
t profitable for the company.
ths of 2004 ? neral administrative the 3 products
lted in variance of the expected costs
doc_120884109.xls
Case: Hilton
Product 101 Rent Property Taxes Propert Insurance Compensation Insurance Direct Labor Indirect Labor Power Light and heat Building Service Materials Supplies Repairs Total Production Cost Selling Expense General Administration Depreciation Interest Total Cost Less Other Income Actual Sales Profit or Loss Unit Sales(Cwt) 337 112 94 148 2321 792 40 27 18 1372 94 32 5387 1635 619 1014 94 8748 18 9279 550 996858
Product 102 417 133 106 115 1619 563 66 34 21 1251 126 40 4490 1215 345 1136 106 7294 14 6900 -380 712102
Product 103 365 78 103 88 1341 448 59 20 14 946 68 20 3548 917 346 713 102 5626 10 5202 -414 501276
Q1: If the company had dropped product 103 as of January 1, 2004, what effect would that action have had on the $158000 pro Total Cost Variable Cost Total Cost - Variable Cost (after dropping Product 103) Total Revenue (after dropping Product 103 ) Loss (After dropping Product 103 21224 2512
18712
16180
-2532
Q2: In January 2005, should the company reduce the price of product 101 from $9.41 to $8.64 ? Old Variable Cost New Variable Cost( increase in 5% for materials and supplies) 4007
4080.3
Old Contribution(when it sells 750000) New Contribution(when it sells 1000000)
3050.5 4559.7
Since the contribution incase of $8.64 is higher the company should decrease the price.
Q3: What is Hilton's most profitable product? Contribution Margin incase of Product 101 Contribution Margin incase of Product 102 Contribution Margin incase of Product 103
5272 3683 2680
So as seen from the contribution margin it is quite evident that Product 101 is the most profitable for the company.
Q4: What appears to have caused the return to profitable operations in the first 6 months of 2004 ? The Rent, Property Taxes, Property insurance,Indirect labour cost,selling expense, general administrative expense, depreciation and interests are the fixed costs which were appropriated to all the 3 products based on the production to get the standard costs. But the actual fixed xosts were the same irrespective of the production. Thus this resulted in variance of the expected costs Hence as the total cost tuned out lower than the standard cost which casued the profit.
Total Standard 1119 323 303 351 5281 1803 165 81 53 3569 288 92 13425 3767 1310 2863 302 21668 42 21381 -244
Total Actual 1021 307 278 348 5308 1721 170 83 50 3544 288 88 13206 3706 1378 2686 290 21224 42 21382 158
that action have had on the $158000 profit for the first 6 months of 2004 ?
t profitable for the company.
ths of 2004 ? neral administrative the 3 products
lted in variance of the expected costs
doc_120884109.xls