### Using variable costing to make business decisions

Assignment Help Financial Accounting
##### Reference no: EM1314388

Using Variable Costing to Make Business Decisions .

John Chang is president of Clean Machines, a new car washing service that makes house calls. John has decided that his goal for the coming year is to earn a profit of \$40,000. Clean Machines reported the following sales and cost information for the year just ended:

 Sales revenue \$60,000 Less all variable costs 20,000 Less all fixed costs 40,000 ___________ Net income \$0 ___________ ___________

Clean Machines performed 500 car washes during the year.

Required
A. How many care washes will Clean Machines need to do in order to earn John's target profit of \$40,000?
B. If John thinks the number of car washes is an unrealistically high goal, what else could he do to achieve his target profit?
C. John is considering raising the price of a car wash to \$130. However, he anticipates that if he raises the price, demand will fall and he will perform 450 car washes. What will his net income be if this occurs? What do you think John should do?

#### Questions Cloud

 Short run and long run aggregate demand : Create another diagram; once again start from an initial macroeconomic equilibrium. Explain both the SR and LR impact of a contractionary AS shock on Y. Use the appropriate diagrams and provide a brief real world example of this type of shock. Find ending finished-goods inventory cost : Find ending finished-goods inventory cost under absorption costing and evaluate the ending finished-goods inventory cost under variable costing? Equations for fiscal policy : The economy of a country called Econoland is described by the following desired aggregate expenditure components (all figures in billions of \$). For the purposes of this question, the first set of equations will be referred to as fiscal policy1. Computation of actual nominal rate of return on the bond : Computation of actual nominal rate of return on the bond and A bond produces a real rate of return of 5.03 percent for a time period when the inflation rate is 3.30 percent Using variable costing to make business decisions : Using Variable Costing to Make Business Decisions - How many care washes will Clean Machines need to do in order to earn John's target profit of \$40,000? Performing hypothesis testing : Looking at the data, the manufacturer is incorrect in its label claim. Perform hypothesis testing to prove or disprove it. Is the manufacturer correct in its label claim? Explain. Accounting treatment for errors and corrections : Accounting treatment for errors and corrections - Income Statement and the stockholder's equity section of the Balance Sheet using the symbol (O/S) for overstated, (U/S) for understated, and (N/E) for no effect. Change in macro variables : Explain how an increase in interest rates initiated by the Federal Reserve affects: Explain determination of real rate of return : Explain Determination of real rate of return

### Write a Review

#### Financial statement analysis and preparation

Financial Statement Analysis and Preparation

#### Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

#### Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

#### Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

#### Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

#### Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

#### Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

#### Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

#### Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

#### Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

#### Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

#### Computation of free cash flow

Computation of Free Cash Flow