Auto Tires has been in the tire business for four years. It rents a building but owns all of its equipment. All employees are paid a fixed salary except for the busy season (April-June), when temporary help is hired by the hour. Utilities and other operating charges remain fairly constant during each month except those in the busy season.
Selling prices per tire average $75 except during the busy season. Because a large number of customers buy tires prior to winter, discounts run above average during the busy season. A 15% discount is given when two tires are purchased at one time. During the busy months, selling prices per tire average $60.
The president of Auto Tires is somewhat displeased with the company's management accounting system because the cost behavior patterns displayed by the monthly breakeven charts are inconsistent; the busy months' charts are different from the other months of the year. The president is never sure if the company has a satisfactory margin of safety or if it is just above the breakeven point.
Required:
| a. | Why might it be difficult to use CVP in this situation? |
| b. | How can the information be presented in a better format for the president? |
The Ford logo on display at the 2009 New York International Auto Show.
Preschool: 3–6 years.
Prevalence of drug use in the United States. Figures are based on a survey of people 12 years of age ...
Climate change occurs over millions of years
Cordilleran-Type Mountain Building
Three years old drawing