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##### E21-30 Determing mixed costs?the high-low method

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Question;E21-30 Determing mixed costs?the high-low methodThe manager of Able Car Inspection reviewed the monthly operating costs for the pastyear. The costs ranged from \$4,000 for 1,000 inspections to \$3,600 for 600 inspections.Requirements3. 3,8001. Calculate the variable cost per inspection.2. Calculate the total fixed costs.3. Write the equation and calculate the operating costs for 800 inspections.4. Draw a graph illustrating the total cost under this plan. Label the axes, andshow the costs at 600, 800, and 1,000 inspections.E21-31 Calculating contribution margin ratio, preparing contribution marginincome statementsFor its top managers, Worldwide Travel formats its income statement as follows:Learning Objective 22. \$245,000 sales level, VC \$73,500Variable Costs \$95,250Sales Revenue \$317,500Fixed Costs \$175,000Contribution Margin \$222,250Operating Income \$47,250WORLDWIDE TRAVELContribution Margin Income StatementThree Months Ended March 31, 2014Worldwide?s relevant range is between sales of \$245,000 and \$364,000.Requirements1. Calculate the contribution margin ratio.2. Prepare two contribution margin income statements: one at the \$245,000 saleslevel and one at the \$364,000 sales level. (Hint: The proportion of each salesdollar that goes toward variable costs is constant within the relevant range.)E21-37 Using sensitivity analysisDependable Drivers Driving School charges \$250 per student to prepare and administerwritten and driving tests. Variable costs of \$100 per student include trainers?wages, study materials, and gasoline. Annual fixed costs of \$75,000 include thetraining facility and fleet of cars.Requirements1b.625 Students1. For each of the following independent situations, calculate the contributionmargin per unit and the breakeven point in units by first referring to theoriginal data provided:a. Breakeven point with no change in information.b. Decrease sales price to \$220 per student.c. Decrease variable costs to \$50 per student.d. Decrease fixed costs to \$60,000.2. Compare the impact of changes in the sales price, variable costs, and fixed costson the contribution margin per unit and the breakeven point in units.P21-63 Computing breakeven sales and sales needed to earn a target profit,performing sensitivity analysisThis problem continues the Davis Consulting, Inc. situation from Problem P19-40of Chapter 19. Davis Consulting provides consulting service at an average price of\$175 per hour and incurs variable cost of \$100 per hour. Assume average fixed costsare \$5,250 a month.Requirements1. What is the number of hours that must be billed to reach the breakeven point?2. If Davis desires to make a profit of \$3,000, how many consulting hours must becompleted?3. Davis thinks it can reduce fixed cost to \$3,990 per month, but variable cost willincrease to \$105 per hour. What is the new breakeven point in hours?

Paper#42066 | Written in 18-Jul-2015

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