Comprehensive Problem 5 Part A: Note: You must complete part A before completing

Question

Comprehensive Problem 5
Part A:

Note: You must complete part A before completing parts B and C.

Part A—Break-Even Analysis

Required:

1. Determine the fixed and variable portion of the utility cost, using the high-low method. Round the per unit cost to the nearest cent.

2. Determine the contribution margin per case. Enter your answer to the nearest cent.

Contribution margin per case $

3. Determine the fixed costs per month, including the utility fixed cost from part (1).

4. Determine the break-even number of cases per month.
cases

At High Point At Low Point Variable cost per unit $ $ Total fixed cost $ $ Total cost $ $

Explanation / Answer

1

Calculation of fixed and variable portion of the utility cost, using the high-low method:

Case Production

Total Cost

At High Point

1200

740

At Low Point

500

600

Difference

700

140

Variable cost per unit = 140 / 700

$               0.20

Total fixed cost = 740 - (1200*0.20)

$                 500

2

Calculation of contribution margin per case:

Per Case

Sales Price

$                       100.00

Less: Variable Expenses:

Selling commission

$                       (20.00)

Direct Material

$                       (17.00)

Direct labor

$                         (7.20)

Utiltiies

$                         (0.20)

Contribution margin per case

$                         55.60

3

Calculation of fixed costs per month:

Facility Lease

$                       14,000

Add: Equipment Depreciation

$                         4,300

Add: Supplies

$                             660

Add: Utilities

$                             500

Calculation of fixed costs per month

$                       19,460

4

Calculation of break-even number of cases per month:

Fixed costs per month

$                       19,460

Contribution margin per case

$                         55.60

Break-even number of cases per month = 19460 / 55.60

                                350

1

Calculation of fixed and variable portion of the utility cost, using the high-low method:

Case Production

Total Cost

At High Point

1200

740

At Low Point

500

600

Difference

700

140

Variable cost per unit = 140 / 700

$               0.20

Total fixed cost = 740 - (1200*0.20)

$                 500

2

Calculation of contribution margin per case:

Per Case

Sales Price

$                       100.00

Less: Variable Expenses:

Selling commission

$                       (20.00)

Direct Material

$                       (17.00)

Direct labor

$                         (7.20)

Utiltiies

$                         (0.20)

Contribution margin per case

$                         55.60

3

Calculation of fixed costs per month:

Facility Lease

$                       14,000

Add: Equipment Depreciation

$                         4,300

Add: Supplies

$                             660

Add: Utilities

$                             500

Calculation of fixed costs per month

$                       19,460

4

Calculation of break-even number of cases per month:

Fixed costs per month

$                       19,460

Contribution margin per case

$                         55.60

Break-even number of cases per month = 19460 / 55.60

                                350

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.