Auto Tires Has Been in the Tire Business for Four

Essay

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.What is wrong with the accountant's computations?
b.How can the information be presented in a better format for the president?