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MGAB03H3 Lecture Notes - Lecture 3: Icq, Variable Cost, Income Statement

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School
UTSC
Department
Financial Accounting
Course
MGAB03H3
Professor
Quan Fun

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Document Summary

Required: the average cost per unit was and units. Estimate the variable cost per unit: sparkle car wash supplier sells a hose washer for buys from the manufacturer for per hose washer. Breakeven is currently at a sales volume of per month. What are the monthly fixed costs associated with the washer? when volume is at or below 200 when monthly volume is above 200 units. Monthly fixed costs are units and variable cost per unit is unit. Cvp, before and after tax, return on sales. Canterman normally produces and sells 500 units per month at each. Be specific about the direction of bias for various cvp items. Data for the most recent three months of operations for the rainbeau salon appear here: A general cost-of-living salary increase occurred at the beginning of may. Required: what is the total cost function for rainbeau salon, if the average fee per appointment is appointments required in june to break even.

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Related Questions

1. A highly automated plant would generally have

all fixed costs

more fixed than variable costs

all variable costs

more variable than fixed costs


2. If the price per unit decreases because of competition but the cost structure remains the same

the breakeven point rises

the degree of combined leverage declines

the degree of financial leverage declines

all of these.


3 If a firm has fixed costs of $31,000, a price of $9.50, and a breakeven point of 15,500 units, the variable cost per unit is:

$8.50

$7.50

$6.00

$9.50

4. Davison Toaster Corp. sells its products for $250 per unit. It has the following costs:

Rent $109,900
Factory labor $29 per unit
Executive salaries $290,000
Raw materials

$6 per unit


The break-even point is

1,210 units

not enough information has been provided to determine the break-even point.

less than 1,710 units

more than 1,210 units

5. A low DOL means:

there is low debt.

there are high overhead costs.

there is a large amount of equity.

there are low fixed costs.

6. Breakeven analysis

is useful to know how much changes in volume affect cost and profit.

short-term profitability.

does not include depreciation expense as a fixed cost when calculating the degree of financial leverage.

all of these.




7. Combined leverage is concerned with the relationship between

changes in EBIT and changes in net income.

changes in volume and changes in EBIT.

changes in volume and changes in EPS.

changes in EBIT and changes in EPS.

Alden Co.’s monthly unit sales and total cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs.

Month Units Sold Total Cost Month Units Sold Total Cost
1 318,000 $ 155,500 7 362,000 $ 292,624
2 163,000 99,250 8 268,000 149,750
3 263,000 203,600 9 76,400 67,000
4 203,000 98,000 10 148,000 128,625
5 288,000 199,500 11 92,000 92,000
6 188,000 110,000 12 98,000 83,650

Estimate both the variable costs per unit and the total monthly fixed costs using the high-low method. (Do not round intermediate calculations.)

High-Low method - Calculation of Variable Cost per Sales Dollar
Change in cost Cost at high point minus cost at low point $225,624 Variable cost per sales dollar = $0.79
Change in volume Volume at high point minus volume at low point $285,600
High-Low method - Calculation of Fixed Costs
Total cost at the high point $292,624.00
Variable costs at the high point:
Volume at the high point: 362,000 units sold
Variable cost per sales dollar $0.79
Total variable costs at the high point 285,980.00
Total fixed costs
Total cost at the low point
Variable costs at the low point:
Volume at the low point:
Variable cost per sales dollar
Total variable costs at the low point
Total fixed costs

Predict future total costs when sales volume is (a) 376,000 units and (b) 416,000 units.

Predictions
Sales (units) 376,000 416,000
Total costs $0 $0

The Wildhorse Company sells sports decals that can be personalized with a player’s name, a team name, and a jersey number for $7.00 each. Wildhorse buys the decals from a supplier for $2.60 each and spends an additional $0.70 in variable operating costs per decal. The results of last month’s operations are as follows:

Sales revenue $14,000
Cost of goods sold 5,200
Gross profit 8,800
Operating expenses 3,100
Operating income

$5,700

1. Calculate contribution margin per unit. (Round answer to 2 decimal places, e.g. 0.38.)

2. What is Wildhorse’s monthly breakeven point in units? In dollars? (Use your answer of breakeven units to calculate the breakeven point in dollars. Round Breakeven units and point in dollar to 0 decimal places, e.g. 25,000.)

3. What is Wildhorse’s margin of safety? (Round answers to 0 decimal places, e.g. 25,000.)