Sam\'s Souvenirs, Inc. sells souvenirs for $25 each. Sam\'s pays rent of S 175 p

Question

Sam's Souvenirs, Inc. sells souvenirs for $25 each. Sam's pays rent of S 175 per month. Its raw materials cost S 8 and its direct labor costs S 5 for each souvenir. Two of Sam's recent electrical utility bills were as follows: Electric Utility Bills production output cost (S) 60 70 Month June 25 a. What is the mixed cost? b. What is the fixed portion of mixed cost? c. What is the variable portion of mixed cost? d. What is the total fixed cost? e. What is the total variable cost? f. What is her breakeven point, in number of tricycles (per month)?

Explanation / Answer

a Utility Bill is mixed cost (70-60)/(25-15) = $1 variable $60- 15 x $1 = $45 Fixed portion of mixed cost b $45 c $1 d 220 (175+45) e 14 (8+5+1) f BEP = Fixed cost/ contribution margin BEP = 220/(25-14) = 20 tricycles

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