Wu Company incurred $103,600 of fixed cost and $118,400 of variable cost when 3,
ID: 2419452 • Letter: W
Question
Wu Company incurred $103,600 of fixed cost and $118,400 of variable cost when 3,200 units of product were made and sold.
If the company's volume increases to 3,700 units, the total cost per unit will be:
65.
$60.
$28.
$32.
2.Zero, Inc. produces a product that has a variable cost of $6.00 per unit. The company's fixed costs are $40,000. The product sells for $11.00 a unit and the company desires to earn a $25,000 profit. What is the volume of sales in units required to achieve the target profit? (Do not round intermediate calculations.)
8,000
7,625
13,000
8,500
3. A product has a contribution margin of $6 per unit and a selling price of $40 per unit. Fixed costs are $30,000. Assuming new technology increases the unit contribution margin by 70 percent but increases total fixed costs by $23,040, what is the new breakeven point in units?
8,820 units
8,400 units
5,200 units
5,000 units
4. The following income statements are provided for Li Company's last two years of operation:
Assuming that cost behavior did not change over the two year period, what is Li Company's contribution margin in 2012?
$17,325
$43,250
$13,325
$12,825
2011 2012 Number of units produced and sold 4,500 4,100 Sales revenue 69,750 63,550 Cost of goods sold (41,700) (38,000) Gross margin 28,050 25,550 General, selling and administrative expenses (17,500) (16,300) Net income $10,550 $9,250Explanation / Answer
1) Variable Cost per unit = 118400/3200 = $37
Fixed Cost Per unit = 103600 / 3700 = $28
Total Cost Per unit = 37 + 28 = $65
Variable Cost per unit changes with every unit production, but fixed cost remains constant regardless of the production assuming the production is within the installed capacity levels.
2) Contribution per unit = 11 – 6 = 5 per unit
Total Contribution Required = fixed Cost + Desired profit = 40000 + 25000 = 65000
Unit sales required = 65000 / 5 = 13000 units
3) Revised Unit Contribution margin per unit = 6 * 1.70 = $ 10.20
Revised Fixed Costs = 30000 + 23040 = 53040
Revised Break Even Point = 53040 / 10.20 = 5200 units
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