Auto Tyres Has Been in the Tyre Business for Four

question 145

Essay

Auto Tyres has been in the tyre business for four years.It rents a building but owns all of its equipment.All regular employees are paid a fixed salary.During the busy season (April-June),temporary help is hired and paid by the hour.Utilities and other operating charges remain fairly constant during each month except those in the busy season.
Selling prices per tyre average $75 except during the busy season when discounts run above average because a large number of customers buy tyres at this time.A 15% discount is given when two tyres are purchased at one time.During the busy months,selling prices per tyre average $60.
The CEO of Auto Tyres is somewhat displeased with the company's management accounting system because the cost behaviour patterns displayed by the monthly break-even charts are inconsistent;the busy months' charts are different from the other months of the year.The CEO is never sure if the company has a satisfactory margin of safety or if it is just above the break-even point.
Required:
a.What is wrong with the accountant's computations?
b.How can the information be presented in a better format for the CEO?
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Definitions:

Psychological Experiments

Research methods used in psychology to collect data and test hypotheses, often involving controlled conditions and variables to study behavior and mental processes.

Mode

The value that appears most frequently in a data set, a measure of central tendency in statistics.

Scores

Quantitative measures or values that represent the outcome of a test, performance, or assessment.

Middle Score

The median value in a set of numbers, representing the point at which half of the figures are above and half are below.