Question

Mason Company produces short videos used in self-help seminars. Mason Company
charges $310 for each video it produces. The number of videos produced over
the last six months along with the total costs of producing these videos is
given below:

Month           Costs Incurred        Videos Produced
June              $18,380                   70
July               17,230                   61
August             14,100                   45
September          16,120                   55
October            15,000                   50
November           18,900                   75

Mason Company expects to produce 64 videos during December.

Using the high-low method, calculate the number of videos Mason Company will
need to produce in December in order to break-even for December.

Answer 1

Using High Low Method From the following data High Activity Cost(HAC) $18900 Low Activity Cost(LAC) = $14100 High Activity unit(HAU) = 75 Low Activity unit(LAU) 45 Variable Cost per unit (HAC-LAC)/(HAU-LAU) ($18900-$14100)/(75-45) =$160 per unit Now we know that Total cost (variable cost unit produced) Fixed Cost $18900 (160*75) + Fixed Cost Fixed Cost $6900 As Mason Company charged $310 per video so Contribution p.u Sales p.u - Variable cost p.u =$310- $160 150.00 As in December 64 videos re to be produced so Total cost (160 64) 6900 $17,140.00 So Break even point Total Fixed Cost/Contribution p.u = $17140/$150 114.27 Approx