Question

Instructions: Respond to the questions below. You must show your work to receive credit. No credit will be given if work is not provided. Each student must submit their own. This bonus assignment is due by the beginning of class on 2/11. Late submissions will NOT be accepted - No exceptions. Prestige World Wide had the following cost information for the first half of the year. Month January February March April May June Units 800 1,200 1,800 1,600 1,500 1,000 Cost $10,000 $15,000 $22,000 $19,000 $17,500 $11,000 The selling price per unit is $20. Expected sales in July are 1,100 units Required: You will need to answer these questions in order. You will use your answers to solve for the following questions. Answer the following: 1. Using the Hi-Low method, what is the variable cost per unit? 2. Using the Hi-Low method, what is the fixed cost? 3. What is the contribution margin for July? 4. What is the operating leverage in July? 5. What is the breakeven point in July? In units and revenue dollars? 6. What is the margin of safety as a percentage in July?

Answer 1

5) Break even pornt in units= Fixed costs Contribution Margen per unit Fixed costs we have already found=4006 Contribution margin per unit= contribution margin Noolunits = P800 Too Break even point in units: 400 = 550

Break even forut fu revenue dollors Sales price per unit & Break even point in units = $200 50 = $1000 6) Margin of safety= Actual sales - Brook utitull even point Actual sales = (ROX 1100)-1000 20x1100 - 01954 In percentage 019544100 = 95.4%

shi Variable cost per units (Highest ac hiung cost-ddwest Ac) (highest activity units-2dwest AV) = ($22,000 - $10,000) (1800-800) = $12,000 1000 = $12 Ans 2) Fixed cost = Highest Activity cost - (Variable cost per units * Highest activity units) We have found variable cost per unit earlier; - $22,000 -($12 * 1800) = 22,000 - 21600 = $400

3) Contribution Mary Pn= Sales revenue- Variable expense For July, Units sold- 1,100 Selling Price= $20 Total sales revenue = $20 * 1100 - $22000 we have earlier found the variable price per unit which was $12 Tostal variable experse in July = $12* 1100 - $13,200 Contribution Margin= $ 22000-$13200 = $8800

4) Operating severage in July = Quantity (price- Variable cost per unit) Quantity & (Price- Variable cost per unit)- Fixed costs Quantity in July = 1100 Price= $20 Variable cort per unit alvody found= $12 Fixed cest already fand = $400 Now put the values in formula; = 1100 (20-12) [1100 (20-12)]-400 = 104 Ans