1 Determining total variable cost LO 11-1 Determine the total variable productio
ID: 2420307 • Letter: 1
Question
1 Determining total variable cost LO 11-1
Determine the total variable production cost, assuming that Raeburn makes 5,000, 15,000 and 25,000 units.
UNITS PRODUCED 5,000 15,000 25,000
TOTAL VARIABLE COST ________ _________ __________
6 Break-even point LO 11-5
Agassi Corporation sells products for $36 each that have variable costs of $13 per unit. Agassi’s annual fixed cost is $526,700.
Determine the break-even point in units and dollars.
BREAK EVEN POINTS IN UNITS ( )
BREAKEVEN POINTS IN DOLLARS ( )
8 Margin of safety LO 11-6
Determine the following:
A, Contribution margin per unit.( )
B.Number of units that Ender must sell to break even. BREAK EVEN IN UNITS ( )
c. Sales level in units that Ender must reach to earn a profit of $127,400. SALES IN UNITS ( )
D. Determine the margin of safety in units, sales dollars, and as a percentage. (Round “Percentage” answer to 1 decimal place (i.e., 0.234 should be entered as 23.4).)
UNITS SALES PERCENTAGE
MARGIN OF SAFETY ________ ________ ______________ %
9 Allocating costs between divisions LO 12-2
Kaplan Services Company (KSC) has 62 employees, 23 of whom are assigned to Division A and 39 to Division B. KSC incurred $373,860 of fringe benefits cost during 2014.
Determine the amount of the fringe benefits cost to be allocated to Division A and to Division B.
DIVISION ALLOCATED COST
1 _________________
2 _________________
13 Allocating to smooth cost over varying levels of production LO 12-3
Production workers for Kennedy Manufacturing Company provided 320 hours of labor in January and 660 hours in February. Kennedy expects to use 4,000 hours of labor during the year. The rental fee for the manufacturing facility is $12,000 per month.
Based on this information, how much of the rental cost should be allocated to the products made in January and to those made in February?
MONTH ALLOCATED COSTS
JANUARY ____________________
FEBRUARY ____________________
The following variable production costs apply to goods made by Raeburn Manufacturing Corporation:Explanation / Answer
Total Variable Cost = Total Quantity of Output * Variable Cost per Unit of Output
So when Raeburn makes 5000 units variable cost = 5000*2.5
= $ 12,500
So when Raeburn makes 15000 units variable cost = 15000*2.5
= $ 37,500
So when Raeburn makes 25,000 units variable cost = 25000*2.5
= $ 62,500
UNITS PRODUCED 5,000 15,000 25,000
TOTAL VARIABLE COST $12,500 $37,500 $62,500
At break-even point the profit is zero therefore the CVP formula is simplified to:
px = vx + FC
Solving the above equation for x which equals break-even point in sales units, we get:
Break-even Sales Units = x =
FC
p v
Breakeven Point in Sales Units (x)
= 526,700 ÷ (36 13)
= 526,700 ÷ 23
= 22,900 units
Break-even point in number of sales dollars is calculated using the following formula:
Break-even Sales Dollars = Price per Unit × Break-even Sales Units
= $36 × 22,900 = $824,400
1
The contribution margin for one unit of product or one unit of service is defined as:
=$(175-84)
=$91
2 Break even unit
Break-even Sales Units = x =
FC
p v
Breakeven Point in Sales Units (x)
= 637,000 ÷ (175 84)
= 637,000 ÷ 91
= 7,000 units
3
(Target profit + fixed expenses)/contribution margin per unit
= ( $127,400 + $637,000) / $91
= 4,000 units
= 8,400 units
4
Margin of Safety = Margin of safety in dollars / Total budgeted or actual sales
Sales(8,400units @$175)
$1,470,000
Break even sales (7,000units @$175)
$ 1,225,000
Margin of safety in dollars
$ 245,000
Margin of safety unit
=245,000 ÷175
=1400
Margin of safety as a percentage of sales:
245,000 /1,470,000
= .1667
= 16.7%
fringe benefits cost to be allocated to Division A
=$373860 ÷62*23
=$138,690
px = vx + FC
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