Review 18-1
Helena Company reports the following total costs at two levels of production.
Classify each cost as variable, fixed, or mixed.
5,000
... [Show More] Units
10,000 Units
Indirect labor
$ 3,000
$ 6,000
Property taxes
7,000
7,000
Direct labor
28,000
56,000
Direct materials
22,000
44,000
Depreciation
4,000
4,000
Utilities
5,000
7,000
Maintenance
9,000
11,000
Exercise 18-4
Your answer is correct.
Family Furniture Corporation incurred the following costs.
Identify the costs as variable, fixed, or mixed.
1.
Wood used in the production of furniture.
2.
Fuel used in delivery trucks.
3.
Straight-line depreciation on factory building.
4.
Screws used in the production of furniture.
5.
Sales staff salaries.
6.
Sales commissions.
7.
Property taxes.
8.
Insurance on buildings.
9.
Hourly wages of furniture craftsmen.
10.
Salaries of factory supervisors.
11.
Utilities expense.
12.
Telephone bill.
Exercise 18-6
PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively.
Production in Units
3,000
Production Costs
Direct materials
$7,500
Direct labor
18,000
Utilities
2,100
Property taxes
1,000
Indirect labor
4,500
Supervisory salaries
1,900
Maintenance
1,100
Depreciation
2,400
Your answer is correct.
Identify the above costs as variable, fixed, or mixed.
Cost
Direct materials
Direct labor
Utilities
Property taxes
Indirect labor
Supervisory salaries
Maintenance
Depreciation
Your answer is correct.
Calculate variable costs per unit, variable cost per unit for utilities and variable cost per unit for maintenance.
Variable cost per unit
Variable cost per unit for utilities
Variable cost per unit for maintenance
Your answer is correct.
Calculate the expected costs when production is 5,000 units.
Cost to produce 5,000 units
Do It! Review 18-2
Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level.
Units Produced
Total Cost
March
10,000
$18,000
April
9,000
16,650
May
10,500
18,580
June
8,800
16,200
July
9,500
17,100
Your answer is correct.
Compute the variable cost per unit using the high-low method.
Variable cost per unit
Your answer is correct.
Compute the fixed cost elements using the high-low method.
Fixed cost
Your answer is correct.
Estimate the total cost if the company produces 9,200 units.
Total cost to produce 9,200 units
Exercise 18-3
The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
Month
Total Maintenance Costs
Total Machine Hours
January
$2,500
300
February
3,000
350
March
3,600
500
April
4,500
690
May
3,200
400
June
4,900
700
Your answer is correct.
Determine the variable cost components using the high-low method.
Variable cost per machine hour
Your answer is correct.
Determine the fixed components using the high-low method.
Total fixed costs
Exercise 18-13
Your answer is correct.
Cannes Company has the following information available for September 2014.
Unit selling price of video game consoles
$400
Unit variable costs
$275
Total fixed costs
$52,000
Units sold
600
(a) Compute the contribution margin per unit.
Contribution margin per unit
(b) Prepare a CVP income statement that shows both total and per unit amounts.
CANNES COMPANY
CVP Income Statement
For the Month Ended September 30, 2014
Total
Per Unit
(c) Compute Cannes' break-even point in units.
Break-even point in units
units
(d) Prepare a CVP income statement for the break-even point that shows both total and per unit amounts.
CANNES COMPANY
CVP Income Statement
For the Month Ended September 30, 2014
Total
Per Unit
Do It! Review 18-3
Your answer is correct.
Larissa Company has a unit selling price of $250, variable cost per unit of $170, and fixed costs of $140,000.
Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit.
(a) Mathematical Equation
(b) Contribution margin per unit
Break-even point
units
units
Exercise 18-8
Your answer is correct.
All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows.
Depreciation
$1,400
per month
Advertising
$200
per month
Insurance
$2,000
per month
Weed and feed materials
$12
per lawn
Direct labor
$10
per lawn
Fuel
$2
per lawn
All That Blooms charges $60 per treatment for the average single-family lawn.
Determine the company’s break-even point in (a) number of lawns serviced per month and (b) dollars.
(a)
Break-even point
(b)
Break-even point
Exercise 18-9
Your answer is correct.
The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.
Salaries
$6,200
per month
Utilities
$1,100
per month
Depreciation
$1,000
per month
Maintenance
$100
per month
Maid service
$11
per room
Other costs
$28
per room
Determine the inn’s break-even point in (1) number of rented rooms per month and (2) dollars.
(1)
Break-even point
(2)
Break-even point
Exercise 18-10
Your answer is correct.
In the month of March, Style Salon services 560 clients at an average price of $120. During the month, fixed costs were $21,024 and variable costs were 60% of sales.
(a) Determine the contribution margin in dollars, per unit, and as a ratio.
Contribution margin
Contribution margin per unit
Contribution margin ratio
(b) Using the contribution margin technique, compute the break-even point in dollars and in units.
Break-even sales
Break-even sales
Exercise 18-11
Your answer is correct.
Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below.
Fare revenues (1,440 fares)
$36,000
Variable costs
Fuel
$5,040
Tolls and parking
3,100
Maintenance
860
9,000
Contribution margin
27,000
Fixed costs
Salaries
12,700
Depreciation
1,300
Insurance
1,000
15,000
Net income
$12,000
(a) Calculate the break-even point in (1) dollars and (2) number of fares.
(1)
Break-even point
(2)
Break-even point
(b) Without calculations, determine the contribution margin at the break-even point.
Contribution margin at the break-even point
Exercise 18-12
In 2013, Manhoff Company had a break-even point of $350,000 based on a selling price of $5 per unit and fixed costs of $112,000. In 2014, the selling price and the variable cost per unit did not change, but the break-even point increased to $420,000.
Your answer is correct.
Compute the variable cost per unit and the contribution margin ratio for 2013.
Variable cost per unit
Contribution margin ratio
Your answer is correct.
Compute the increase in fixed costs for 2014.
Increase in fixed cost
Exercise 18-14
Naylor Company had $210,000 of net income in 2013 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2014. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2014.
Your answer is correct.
Compute the number of units sold in 2013.
Your answer is correct.
Compute the number of units that would have to be sold in 2014 to reach the stockholders’ desired profit level.
Your answer is correct.
Assume that Naylor Company sells the same number of units in 2014 as it did in 2013. What would the selling price have to be in order to reach the stockholders’ desired profit level?
New selling price
Exercise 18-15
Your answer is correct.
Cottonwood Company reports the following operating results for the month of August: sales $400,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following independent courses of action to increase net income.
1.
Increase selling price by 10% with no change in total variable costs or units sold.
2.
Reduce variable costs to 45% of sales.
Compute the net income to be earned under each alternative.
1.
Net Income
2.
Net Income
Which course of action will produce the highest net income?
Do It! Review 18-4
Your answer is correct.
Presto Company makes radios that sell for $30 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $18 per unit.
(a) Compute the break-even point in dollars using the contribution margin (CM) ratio.
Break-even point
(b) Compute the margin of safety ratio assuming actual sales are $800,000.
Margin of safety
(c) Compute the sales dollars required to earn net income of $140,000.
Required sales
Exercise 18-17
Oak Bucket Co., a manufacturer of wood buckets, had the following data for 2013.
Sales
2,600
units
Sales price
$40
per unit
Variable costs
$16.00
per unit
Fixed costs
$19,500
Your answer is correct.
What is the contribution margin ratio?
Contribution margin ratio
Your answer is correct.
What is the break-even point in dollars?
Break-even point [Show Less]