Question

PLA so VC DL Cmn 501000 Depr. 15.000 FC 1. The following financial statement amounts related to producing 2,000 units: Direct materials $30,000 Sales 100.000 - Depreciation expense 15,000 DM 30,000 Sales revenue 100,000 20.000 Direct labor (Variable cost) 20,000 Rent expense 15,000 TL Rent. 15,000 a. How much is contribution margin per unit? NI 20,000 0.0001 2000 - 25 b. What is the company's contribution margin ratio? 50% c. What is the company's break-even in units? . Fix cost 30.000 - 1200 unit Contri. Marg. 25 d. What is the company's break-even in sales? 1200 X 25 CO,000 SO -s 601000 or e. What is the company's margin of safety? Proskien Mos= sales-BE sales 100, -60=4OK. f. How many units must the company sell to earn $50,000 profit? FC 30.000 + Taigorrit 501000 - 80000/25 3200 units g. This company has the option of renting a machine for $5,000 a month that will cut direct labor costs by 20%. Assuming production of 2,000 units, should it rent the machine 20000 20% = 4000 save spend 5000 h. How much will it save/lose by renting the machine? 1000 lose i. What is the minimum number this company must produce in order to save money by renting the machine? DL - 201000 / 1000 = 10 X.20 = $2 25 3 500 o 23 CM 23 2. Using the High-low method calculate the VC per unit, FC, and total costs at 2.200 units. Month Units produced Total costs June 1,800 $35,000 1,800 1,200 July $25,000 -T1000 August 1,700 $34,000 800 September 1,000 $20,000 5.Are the following mixed, fixed, or variable costs? Cost 1,000 Units 1,500 Units $10,000 m $12,000 40.000 FIX 40.000 80,000 var 120,000 - stay the same 60,000 mix 70,000

Answer 1

Total units Direct material Depreciation expense sales revenue Direct labor Rent expense 2000 Units $30,000 $15,000 $100,000 $20,000 $15,000 $50 (100,000/2000) Selling price Less: Variable costs Direct material per unit Direct labor per unit Contribution margin per unit $15 (30,000/2000) $10 (20,000/2000) $25 Contribution margin ratio 50% (25/50) c. Breakeven in units Fixed Cost/contribution per unit (15000+15000)/25 1,200 Breakeven in units d. Breakeven in sales dollar Fixed Cost/contribution margin 30000/50% $60,000 Breakeven in sales dollar MOS Current sales - breakeven sales 100000-60000 $40,000 MOS Units to be sold for target profit (Target profit+fixed Cost)/Contribution per unit (50,000+30,000)/25 3,200 units Units to be sold for target profit

- Rent of machine Savings of labor cost Loss per month Hence, it should not rent the machinery 5000 4000 (20000*20%) 1000 mm h. lose per month on renting 1000 50 (100,000/2000) omst in m Selling price Less: Variable costs Direct material per unit Direct labor per unit Contribution margin per unit 15 (30,000/2000) 8 (16,000/2000) 27 $2.00 Contribution margin per unit Fixed cost Renting Not renting $27 $25 $36,000 $30,000 Differencial $2 $6,000 umst Units to be sold in order to save money by renting 3,000 (6000/2) som Month June July August September Units produce Total cost 1800 $35,000 1200 $25,000 1700 $34,000 1000 $20,000 omst Los Highest values Lowest values Differential Variable cost per unit 1800 1000 800 $35,000 $20,000 $15,000 18.75 (15000/800)

Highest values Lowest values Differential Variable cost per unit Fixed Cost 1800 1000 800 $35,000 $20,000 $15,000 18.75 (15000/800) 35000-1800*18.75 35,000-33750 $1,250 Fixed Cost Total cost at 2200 units 1250+18.75*2200 $42,500 3 Cost 1000 units 1500 units 10000 12000 Mixed 40000 40000 Fixed 80000 120000 Variable 60000 70000 Mixed Differencial Differencial per per Differential unit* 1000 unit*1500 Differential per unit units units 500 2000 4000 6000 0 0 40000 80 80000 120000 10000 20000 30000

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