1. Tilly Company had the following cost and volume data for the first four month
ID: 2419206 • Letter: 1
Question
1. Tilly Company had the following cost and volume data for the first four months of the year.
January: Cost of $52,500; volume of 9,000 units
February: Cost of $40,000; volume of 6,500units
March: Cost of $70,000; volume of 14,000 units
April: Cost of $60,000; volume of 11,000 units
Using the least-squares methodor the scattergraph method, which ONE of the following is the BEST estimate of the variable cost per unit?
2.
Product A
Sales Quantity: 12,000 units
Price per Unit: $5.50
Variable Costs per Unit: $1.15
Product B
Sales Quantity: 18,000 Units
Price per Unit: $3.00
Variable Costs per Unit: $0.90
Total fixed costs are $225,000. What is the break-even point forthis company in units? Assume that the sales mix stays the same.
Monte Motors sells two different products. Following are the monthly revenues and costs:Product A
Sales Quantity: 12,000 units
Price per Unit: $5.50
Variable Costs per Unit: $1.15
Product B
Sales Quantity: 18,000 Units
Price per Unit: $3.00
Variable Costs per Unit: $0.90
Total fixed costs are $225,000. What is the break-even point forthis company in units? Assume that the sales mix stays the same.
Explanation / Answer
1. Variable cost per unit = Change in cost/change in level of production
= (52500 - 40000)/(9000 - 6500)
= $5 per unit
Fixed cost = 52500 - 5x9000
= 7500
2. Contribution per unit of A = 5.50 -1.15 = 4.35
Contribution per unit of B = 3 - 0.90 = 2.10
Weighted average cotribution per unit = 4.35 x 40% + 2.10x 60%
= 3
Break even point in units = Fixed cost/contribution per unit
= 225000/3
= 75000 units
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