Question

vuu Corporation accumulates the following data concerning a mixed cost, using miles as the activity level. Miles Driven Total Cost Miles Driven Total Cost January 10,000 $16,500 March 9,000 $12,500 February 8,000 $14,500 April 7,000 $12,000 Instructions Compute the variable and fixed cost elements using the high-low method. 25. In the month of April, Avante Salon gave 2.500 haircuts, shampoos, and permanents at an average price of $40. During the month, fixed costs were $20,000 and variable costs were 75% of sales. Instructions (a) Determine the contribution margin in dollars, per unit, and as a ratio. (b) Using the contribution margin technique, compute the break-even point in dollars and in units. (C) Compute the margin of safety dollars and as a ratio. 26. Lazaro Inc. sells two product lines. The sales mix of the product lines is: Standard, 60%; and Deluxe, 40%. The contribution margin ratio of each line is: Standard, 40%; and Deluxe, 45%. Lazaro's fixed costs are $1,575,000. Instructions What is the dollar amount of Deluxe sales at the break-even point?

Answer 1

24.

Variable cost per mile = (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)

= (16,500 - 12,000)/(10,000 - 7,000)

= 4,500/3,000

= $1.5 per mile

Fixed cost = Highest activity cost - (Highest activity x Variable cost per mile)

= 16,500 - (10,000 x 1.5)

= 16,500 - 15,000

= $1,500

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