Determine fixed cost per month and variable cost


Question 1: Account analysis: lancer audio produces a high-end DVD player that sells for $1250.  Total  for July operating expenses were as follows:

Units produced and sold                140

Component cost                        67000
Supplies                                     1680
Assembly labor                         23500
Rent                                          2200
Supervisor salary                       5500
Electricity                                    250
Telephone                                   180
Gas                                            200
Shipping                                    1540
Advertising                                2500
Administration costs                  14500
Total                                        119050

Required:

A. Use account analysis to determine fixed cost per month and variable cost per DVD player.

B. Project total cost for august assuming production and sales of 160 units.

C. What is the contribution margin per DVD?

D. Estimate total profit assuming production and sales of 160 units.

E. Lancer audio is considered an order for 100 DVD players, to be produced in the next 10 months, from a customer in Canada.  The selling price will be $900 per unit (under the normal price). However, the Lancer audio name will not be attached to the product. What will be the impact on company profit associated with this order?

Question 2: High low, break even. Lancer audio produces a high-end DVD player that sells for 1250. Total operating expenses for the past 12 months are as follows:

                               Units produced and sold                 cost
August                                 125                                112,670
September                           145                                121,990
October                                150                                129,500
November                             160                               131,500
December                             165                               139,700
January                                 140                              117,400
February                               145                               125,600
March                                   135                               115,400
April                                     130                               116,140
May                                      135                               119,220
June                                      145                              121,700
July                                       140                              119,050

Required:

A. Use the high-low method to estimate fixed and variable cost.
B. Based on these estimates, calculate the break-even level of sales in units.
C. Calculate the margin of safety for the coming august assuming estimated sales of 160 units.
D. Estimate total profit assuming production and sales of 160 units.
E. Comment on the limitations of high-low method in estimating costs for Lancer audio.

Question 3: Account analysis, High-low, contribution margin.  Information on occupancy and costs at the New Hotel for April,   May, and June are indicated below:

                                        April                  May            June
Occupancy                        1500                 1650            1800
Day Manager salary           4200                 4200            4200
Night manager salary         3700                 3700            3700
Cleaning Staff                  15300               15600           15900
Depreciation                    12000                12000           12000
Food and beverages          4600                  5300            5800
Total                               39800                40800           41600

Required:

A. Calculate the fixed costs per month and the variable cost per occupied room using account analysis for April.

B. Calculate the fixed costs per month and the variable cost per occupied room using the high-low method.

C. Average room rates are $110 per night.  What is the contribution margin per occupied room?  In answering this question.

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Accounting Basics: Determine fixed cost per month and variable cost
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