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1. The manufacturing costs of Carrefour Enterprises for the first three months of the year...

Question:

1. The manufacturing costs of Carrefour Enterprises for the first three months of the year follow:

Total Costs Units Produced
June $300,000 2,700 units
July 440,000 5,500 units
August 325,000 3,500 units

Using the high-low method, determine:

(a) the variable cost per unit and

(b) the total fixed cost.

2. Scrushy Company sells a product for $150 per unit. The variable cost is $110 per unit, and fixed costs are $200,000.

Determine:

(a) the break-even point in sales units and

(b) the break-even point in sales units if the company desires a target profit of $50,000.

3. Wide Open Industries Inc. has fixed costs of $475,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow:

Product Selling Price Variable Cost per Unit Contribution Margin per Unit
AA $145 $105 $40
BB 110 75 35

The sales mix for products AA and BB is 60% and 40%, respectively.

Determine the break-even point in units of AA and BB.

4. Einhorn Company has fixed costs of $105,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow:

Product Selling Price Variable Cost per Unit Contribution Margin per Unit
QQ $50 $35 $15
ZZ 60 30 30

The sales mix for products QQ and ZZ is 40% and 60%, respectively.

Determine the break-even point in units of QQ and ZZ.

Variable cost & total cost

variable cost is the cost which is variable overall but fixed for per unit if more numbers of units produced the cost will be higher and if number of units are less the cost will also be less. it is directly relates to the production level. total cost consist both variable and fixed cost.

Answer and Explanation:

A. The costs which alter with the change in production are called variable cost. The cost which remains constant despite of change in production are called fixed costs.

All costs cannot be segregate into fixed or variable cost. Some costs are semi variable in nature; that is variable as well as fixed.

Using the high low method the semi variable costs can be segregated into variable and fixed components.

a. Highest cost amounting to $900000 is incurred in February for producing 40000 units

Lowest cost amounting to $ 350000 is incurred in March for producing 12500 units.

Variable cost per unit = Difference in highest and lowest cost/ difference in units

Variable cost per unit (900000-350000)/(40000-12500)
Variable cost per unit 550000/27500
Variable cost per unit $20

B. The costs which alter with the change in production are called variable costs. The costs which remain constant despite of change in production are called fixed cost.

All cost cannot be segregate into fixed or variable. Sometimes costs are semi variable in nature ; that is variable as well as fixed.

Using the high ? low method, the semi variable costs can be segregated into variable and fixed components.

a. Highest cost amounting to $ 440000 is incurred in July for producing 5500 units.

Lowest cost amounting to $300000 is incurred in March for producing 2700 units.

Variable cost per unit= Difference in highest and lowest cost / difference in units

Variable cost per unit (440000-300000)/(5500-2700)
Variable cost per unit 140000/2800
variable cost per unit $50

b. Variable cost per unit = $50

Therefore, variable cost for 2700 units

50*2700 $135000

Total cost= Fixed cost + variable cost

Fixed cost= Total cost ? variable cost

Fixed cost 300000-135000
Fixed cost $165000

Learn more about this topic:

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Variable Costing: Method, Formula & Advantages

from Financial Accounting: Help and Review

Chapter 13 / Lesson 5
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