Question

1. The manufacturing costs of Rosenthal Industries for the first three months of the year follow:

	Total Costs		Production
January	$131,040		910	units
February	197,580		1,680
March	203,840		2,210

Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.

a. Variable cost per unit	$
b. Total fixed cost	$

2. Break-even sales and sales to realize operating income

For the current year ended March 31, Cosgrove Company expects fixed costs of $555,000, a unit variable cost of $62, and a unit selling price of $92.

a. Compute the anticipated break-even sales (units).
units

b. Compute the sales (units) required to realize operating income of $129,000.
units

3. Beck Inc. and Bryant Inc. have the following operating data:

	Beck Inc.		Bryant Inc.
Sales	$374,100		$1,122,000
Variable costs	(150,100)		(673,200)
Contribution margin	$224,000		$448,800
Fixed costs	(154,000)		(261,800)
Operating income	$70,000		$187,000

a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.

Beck Inc.
Bryant Inc.

b. How much would operating income increase for each company if the sales of each increased by 15%? If required, round answers to nearest whole number.

	Dollars	Percentage
Beck Inc.	$		%
Bryant Inc.	$

Answer 1

Calculation in = 1. Vaniable Cost Per unit Highest activity Cost - lowest activity cost Highest activity Unit- lowest activity unit = 203840 - 131040 2210-910 $56 per unit ao = b. Total Fixed - Cost Total Cost Number of x L unity Variable cost per unit , = 203840 -(2210 x 56) 80080 2.0. Breakevens = Unity Fixed cost Sales - Variable Cost 5 5 5000 92-62 18500 unite = bu Required = Fixed cost t Target profit Sales - Variable cost. 55.5000 + 129000 92-62 22800 units

a 3.0 Degree of operating leverage Beck Inc Contribution margin Net operating Income 224000 = 3.2 70ooo = Bryant Inc 448800 187000 - 204 Percentage = Increase profit Beck Inc = Percentage x Degree of increase in sales operating leveres 15% X 302 = 48%. Bryant inc = 15%. x 204 = 36% Dollar Profit Increue = Existing operation Income x Percent Beck Inc = 70000 x 48% = 33600 Bryant Inc = 187000 x 36%. $67320 operating Income Increue by Beck Inc = $3600 A Dollar C Percentage 48% Bryant înc = $67320 1 38%