GIVEN: X Company manufactures and sells Product IV. As part of the budgeting pro
ID: 2424448 • Letter: G
Question
GIVEN: X Company manufactures and sells Product IV. As part of the budgeting process, management made the following estimates for 2016 related to the production and sale of 10,000 units of Product IV. X Company maintains near zero inventory levels at year-end so the total of all production costs approximates cost of goods sold. Product IV sells for $125 per unit.
Estimated
Fixed Costs
Estimated
Variable Costs
Production Costs:
Direct Materials
$157,200
Direct Labor
$198,000
Factory Overhead
$60,000
$28,400
Selling & Administrative Costs:
Salaries & Commissions
$168,000
$110,800
Advertising
$52,000
Miscellaneous selling & administrative
$20,000
$5,600
$300,000
$500,000
REQUIRED: (Show supporting calculations.)
Part 6: Construct a cost-volume-profit graph for the range of 0 units to 10,000 units. Label the axes, lines
and breakeven point.
Estimated
Fixed Costs
Estimated
Variable Costs
Production Costs:
Direct Materials
$157,200
Direct Labor
$198,000
Factory Overhead
$60,000
$28,400
Selling & Administrative Costs:
Salaries & Commissions
$168,000
$110,800
Advertising
$52,000
Miscellaneous selling & administrative
$20,000
$5,600
$300,000
$500,000
Explanation / Answer
variable cost = (total highest cost at 10000 units - total cost at 0 unit) / ( 10000 units - 0 units)
= (300000 + 500000) - 300000 / 10000 units
= 800000 - 300000 / 10000
= $500000 / 10000
=$50 per unit
Fixed cost = total cost at 10000 units - variable cost* 10000 units
= 800000 - $50 * 10000
= $800000 - 500000
= $300000
equation is:-
y = $300000 + $50b
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