Assignment: High-Low, Profit Equation: Rhetorix, Inc. produces stereo speakers. Each unit (apair of speakers) sells for $800. Below is information on production on product/sales and costs for 2007.
|
Production and Sales in Unit |
|
Production Costs |
|
Selling and Admin. Costs |
|
|
|
|
|
|
| January |
100 |
|
$83,400 |
|
$22,700 |
| February |
112 |
|
92,300 |
|
24,500 |
| March |
92 |
|
79,000 |
|
21,700 |
| April |
101 |
|
82,900 |
|
23,300 |
| May |
110 |
|
89,800 |
|
24,200 |
| June |
120 |
|
96,500 |
|
25,300 |
| July |
123 |
|
98,900 |
|
26,000 |
| August |
127 |
|
102,300 |
|
26,200 |
| September |
133 |
|
108,900 |
|
27,200 |
| October |
121 |
|
98,000 |
|
25,600 |
| November |
119 |
|
96,000 |
|
26,100 |
| December |
103 |
|
89,500 |
|
24,100 |
| Total |
1,361 |
|
$1,117,500 |
|
$296,900 |
|
|
|
|
|
|
| Average cost per unit |
|
|
$821.09 |
|
$218.15 |
Required to do:
1) Use the high-low method to identify the fixed and viable cost components for both production costs and selling and administrative costs.
2) The company estimates that production and sales in 2008 will be 1,500 units. Based on this estimate, forecast income before taxes for 2008.