# HOS 372 Chapter 7 Homework Assignment 2015

February 14, 2018

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

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