Brief Exercises: BE5-1,B E5-2, BE5-4
Exercises: E6-3, E6-5, E6-7
Monthly production costs in Pesavento Company for two levels of production are:
Cost 2,000 units 4,000 units
Indirect labor $10,000 $20,000
Supervisory salaries 5,000 5,000
Maintenance 4,000 7,000
Indicate which costs are variable, fixed, and mixed, and give the reason for each answer.
For Lobes Company, the relevant range of production is 40-80% of capacity. At 40% of capacity, a variable cost is $4,000 and fixed cost is 6,000. Diagram the behavior of each cost within the relevant range assuming the behavior is linear
Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level.
Miles Driven Total Cost Miles Driven Total Cost
January 8,000 $14,150 March 8,500 $15,000
February 7,500 13,500 April 8,200 14,490
Compute the variable and the fixed cost element using the high-low method.
Norton Company reports the following operating results for the month of August: sales $310,000 (units 5,000); variable cost $210,000 and fixed cost $75,000. Management is considering the following independent courses of action to increase net income.
Increase selling price by 10% with no change in total variable cost or sales volume.
Reduce variable costs to 58% of sales.
Reduce fixed costs by $20,000
Hall Company had sales in 2014 of $1,560,000 on 60,000 units. Variable costs totaled $720,000, and fixed costs totaled $500,000.
A new raw material is available that will decrease the variable costs per unit by 25% (or $3.00). However, to process the new raw material, fixed operating costs will increase by $150,000. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 5% increase in the number of units sold.
Prepare a projected CVP income statement for 2014 (a) assuming the changes have not been made, and (b) assuming that changes are made as described.
QwikReparis has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repairs: Oil change-related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 60% contribution margin ratio. The company’s fixed costs are $16,000 (that is, $80,000 per service outlet).
Calculate the dollar amount of each type of service that the company must provide in order to break even.
The company has a desired net income of $60,000 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet?