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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 37
Resource Supply and Usage, Adding a Service Line, Relevancy
Roxanne Morton owns a beauty shop with eight hair and nail professionals. Her shop is relatively large and has four rooms at the back, three of which are currently empty (the fourth is used to store supplies). Roxanne's is popular and typically busy Monday through Friday all day and Saturday until noon. She has been thinking about adding a tanning salon in the back of the shop. She figures that she can buy two tanning beds for $10,000 each. The necessary supplies (cleaning materials, complimentary skin lotion in each room) will run about $450 per month. The extra electricity will cost about $100 per month. Currently, Roxanne pays part-time help to staff the front desk, make appointments, check clients in, and so on. For the hours that the beauty salon is open, the current staff can easily handle the additional tanning salon duties. However, Roxanne knows that she'll have to stay open an additional four hours each weeknight (from 5 p.m. until 9 p.m) as well as six hours on both Saturday and Sunday afternoons. Hiring additional staff for the tanning salon during those hours will cost about $8 per hour.
Required:
1. Classify the resources associated with the tanning salon as (1) flexible or (2) committed.
2. (a) Suppose that the tanning salon does very well and Roxanne decides to add one more tanning bed, using the third room at the back of the shop. What additional costs are relevant? (b) Suppose that Roxanne decides to add two more tanning beds? How will your answer to (a) change?
Roxanne Morton owns a beauty shop with eight hair and nail professionals. Her shop is relatively large and has four rooms at the back, three of which are currently empty (the fourth is used to store supplies). Roxanne's is popular and typically busy Monday through Friday all day and Saturday until noon. She has been thinking about adding a tanning salon in the back of the shop. She figures that she can buy two tanning beds for $10,000 each. The necessary supplies (cleaning materials, complimentary skin lotion in each room) will run about $450 per month. The extra electricity will cost about $100 per month. Currently, Roxanne pays part-time help to staff the front desk, make appointments, check clients in, and so on. For the hours that the beauty salon is open, the current staff can easily handle the additional tanning salon duties. However, Roxanne knows that she'll have to stay open an additional four hours each weeknight (from 5 p.m. until 9 p.m) as well as six hours on both Saturday and Sunday afternoons. Hiring additional staff for the tanning salon during those hours will cost about $8 per hour.
Required:
1. Classify the resources associated with the tanning salon as (1) flexible or (2) committed.
2. (a) Suppose that the tanning salon does very well and Roxanne decides to add one more tanning bed, using the third room at the back of the shop. What additional costs are relevant? (b) Suppose that Roxanne decides to add two more tanning beds? How will your answer to (a) change?
Explanation
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Verified
Concept:
Committed resources
If a chan...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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