Down Jackets has three types of costs: jacket cost, factory rent cost, and utilities cost. This company sells its jackets for $16.50 each. Management has prepared the following estimated cost information for next month under two different sales levels.
| At 10,000 Jackets | At 12,000 Jackets |
Jacket cost | $80,000 | $96,000 |
Rent cost | 6,000 | 6,000 |
Utilities cost | 8,400 | 9,900 |
Required
1.Compute what the company should expect for total variable cost if 11,000 jackets are sold next month. (Hint: Use the high-low method to separate jacket and utilities costs into their variable and fixed components.)
2.Prepare its contribution margin statement for a monthly sales volume of 12,000 jackets.
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