Lodney Tho mos 1/27/2018 Deliver Tneks Real Estate Taxes 2)The following data is

Question

Lodney Tho mos 1/27/2018 Deliver Tneks Real Estate Taxes 2)The following data is given for mixed costs Month Units Produced Total Mixed Cost 10000 10500 9500 16650 18580 17100 a) Compute the variable and fixed cost elements using the high-low method. "Mixed Costs" sheet attached. b)Estimate the total mixed cost if the company produces 9200 units 3) You are provided with the following for the month of February 2018 Units sold Price per unit Total variable costs Fixed Costs 2000 400 250000 150000 a) Given this data, prepare an income statement for the month Model blank sheet attached. b) What is the break even in units? c) If the targeted net income is 600000, what is the required sales in units 4) Identify the following costs as relevant, opportunity,sunk or none of these. Option A (make) Option B (Buy 1000 500 40000 25000 35000 1000 500 Taxes Building Lease Manufacturing Equip. Purchase Materials Labor Purchase of Terminals In House Equipment Available for a Special Order

Explanation / Answer

Solution 1:

Solution 2 a:

Highest level of activity = 10500 units, mixed cost = $18,580

Lowest level of activity = 8800 units, mixed cost = $16,200

Variable cost = (Cost at high level - cost at low level) / (Highest activity level - Lowest actvity level)

= ($18,580 - $16,200) / (10500 - 8800) = $1.40 per unit

Fixed cost = $18580 - (10500*$1.40) = $3,880

Mixed cost equation = $3,880 + $1.40X, where x is number of unit produced

Solution 2 b:

Estimated mixed cost at 9200 units = $3,880 + 9200*$1.40 = $16,760

Solution 3:

Breakeven units = Fixed cost / contribution per unit = $150,000 / $275 = 545 units

Target net income = $600,000

Target contribution = $600,000 + $150,000 = $750,000

Nos of units to be sold = $750,000 / $275 = 2727 units

Identification of cost as variable, fixed and mixed Cost description Nature of cost Deliver Trucks Variable Depreciation Fixed Direct Labor Variable Building Rent Fixed Manufacturing machine maintenance Mixed Sales Commission Variable Real estate taxes Variable Raw Materials Variable

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