Toshiba manufacturing produces and sells CD players. The selling price for a CD player is $100....
Toshiba manufacturing produces and sells CD players. The selling price for a CD player is $100. Total operating expenses for the past 12 months are as follows.
Month Unit Sold Cost($)
January 135 10767
February 145 13799
March 150 12457
April 160 12650
May 165 13765
June 140 11240
July 145 12065
August 125 10820
September 120 11110
October 135 11420
November 145 11670
December 140 11576
1. Using the high-low method, what is the variable cost per unit?
2. Based on your answer from question #1, how much is fixed costs, and what is the cost function?
3. According to your estimated cost function from question #2, what is the break- even point of sales?
Homework Answers
| Variable cost per unit | |||||
| Units | Cost | ||||
| May -High Activity | 165 | 13765 | |||
| Sep -Low activity | 120 | 11110 | |||
| Change | 45 | 2655 | |||
| Variable ccost per unit = Change in cost / Change in units | |||||
| 2655/45 = 59 per unit | |||||
| Total Fixed cost: | |||||
| Cost at high activity | 13765 | ||||
| Less: Variable cost (165 units @59) | 9735 | ||||
| Total Fixed cost: | 4030 | ||||
| Cost function C(x) = 4030 + 59x | |||||
| Contribution margin per unit: | |||||
| Selling price | 100 | ||||
| Lless: Variable cost | 59 | ||||
| CM per unit | 41 | ||||
| Break even units: | |||||
| Total fixed cost | 4030 | ||||
| Divide: CM per unit | 41 | ||||
| Break even units: | 98.29 units | ||||
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Problem 4-3 Shamrock Audio produces a high-end DVD player that sells for $1,200. Total operating expenses...
Problem 4-3
Shamrock Audio produces a high-end DVD player that sells for
$1,200. Total operating expenses for the past 12 months are as
follows:
Units Produced and Sold
Cost
August
164
$141,653
September
131
116,505
October
149
130,852
November
145
126,886
December
155
135,009
January
171
143,225
February
140
123,748
March
149
130,929
April
145
126,259
May
151
128,811
June
141
123,261
July
136
119,311
Use the high-low method to estimate fixed and variable
costs.
Estimated fixed cost
$
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Problem 4-3
Shamrock Audio produces a high-end DVD player that sells for
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August
164
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September
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October
149
130,852
November
145
126,886
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135,009
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February
140
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March
149
130,929
April
145
126,259
May
151
128,811
June
141
123,261
July
136
119,311
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costs.
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