Review 18-1 Helena Company reports the following total costs at two levels of production.

Review 18-1 Helena Company reports the following total costs at two levels of production. Classify each cost as variable, fixed, or mixed. 5,000 Units 10,000 Units Indirect labor $ 3,000 $ 6,000 Property taxes 7,000 7,000 Direct labor 28,000 56,000 Direct materials 22,000 44,000 Depreciation 4,000 4,000 Utilities 5,000 7,000 Maintenance 9,000 11,000 Exercise 18-4 Your answer is correct. Family Furniture Corporation incurred the following costs. Identify the costs as variable, fixed, or mixed. 1. Wood used in the production of furniture. 2. Fuel used in delivery trucks. 3. Straight-line depreciation on factory building. 4. Screws used in the production of furniture. 5. Sales staff salaries. 6. Sales commissions. 7. Property taxes. 8. Insurance on buildings. 9. Hourly wages of furniture craftsmen. 10. Salaries of factory supervisors. 11. Utilities expense. 12. Telephone bill. Exercise 18-6 PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively. Production in Units 3,000 Production Costs Direct materials $7,500 Direct labor 18,000 Utilities 2,100 Property taxes 1,000 Indirect labor 4,500 Supervisory salaries 1,900 Maintenance 1,100 Depreciation 2,400 Your answer is correct. Identify the above costs as variable, fixed, or mixed. Cost Direct materials Direct labor Utilities Property taxes Indirect labor Supervisory salaries Maintenance Depreciation Your answer is correct. Calculate variable costs per unit, variable cost per unit for utilities and variable cost per unit for maintenance. Variable cost per unit Variable cost per unit for utilities Variable cost per unit for maintenance Your answer is correct. Calculate the expected costs when production is 5,000 units. Cost to produce 5,000 units Do It! Review 18-2 Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level. Units Produced Total Cost March 10,000 $18,000 April 9,000 16,650 May 10,500 18,580 June 8,800 16,200 July 9,500 17,100 Your answer is correct. Compute the variable cost per unit using the high-low method. Variable cost per unit Your answer is correct. Compute the fixed cost elements using the high-low method. Fixed cost Your answer is correct. Estimate the total cost if the company produces 9,200 units. Total cost to produce 9,200 units Exercise 18-3 The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January $2,500 300 February 3,000 350 March 3,600 500 April 4,500 690 May 3,200 400 June 4,900 700 Your answer is correct. Determine the variable cost components using the high-low method. Variable cost per machine hour Your answer is correct. Determine the fixed components using the high-low method. Total fixed costs Exercise 18-13 Your answer is correct. Cannes Company has the following information available for September 2014. Unit selling price of video game consoles $400 Unit variable costs $275 Total fixed costs $52,000 Units sold 600 (a) Compute the contribution margin per unit. Contribution margin per unit (b) Prepare a CVP income statement that shows both total and per unit amounts. CANNES COMPANY CVP Income Statement For the Month Ended September 30, 2014 Total Per Unit (c) Compute Cannes' break-even point in units. Break-even point in units units (d) Prepare a CVP income statement for the break-even point that shows both total and per unit amounts. CANNES COMPANY CVP Income Statement For the Month Ended September 30, 2014 Total Per Unit Do It! Review 18-3 Your answer is correct. Larissa Company has a unit selling price of $250, variable cost per unit of $170, and fixed costs of $140,000. Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit. (a) Mathematical Equation (b) Contribution margin per unit Break-even point units units Exercise 18-8 Your answer is correct. All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows. Depreciation $1,400 per month Advertising $200 per month Insurance $2,000 per month Weed and feed materials $12 per lawn Direct labor $10 per lawn Fuel $2 per lawn All That Blooms charges $60 per treatment for the average single-family lawn. Determine the company’s break-even point in (a) number of lawns serviced per month and (b) dollars. (a) Break-even point (b) Break-even point Exercise 18-9 Your answer is correct. The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows. Salaries $6,200 per month Utilities $1,100 per month Depreciation $1,000 per month Maintenance $100 per month Maid service $11 per room Other costs $28 per room Determine the inn’s break-even point in (1) number of rented rooms per month and (2) dollars. (1) Break-even point (2) Break-even point Exercise 18-10 Your answer is correct. In the month of March, Style Salon services 560 clients at an average price of $120. During the month, fixed costs were $21,024 and variable costs were 60% of sales. (a) Determine the contribution margin in dollars, per unit, and as a ratio. Contribution margin Contribution margin per unit Contribution margin ratio (b) Using the contribution margin technique, compute the break-even point in dollars and in units. Break-even sales Break-even sales Exercise 18-11 Your answer is correct. Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s activity in the form of a cost-volume-profit income statement is shown below. Fare revenues (1,440 fares) $36,000 Variable costs Fuel $5,040 Tolls and parking 3,100 Maintenance 860 9,000 Contribution margin 27,000 Fixed costs Salaries 12,700 Depreciation 1,300 Insurance 1,000 15,000 Net income $12,000 (a) Calculate the break-even point in (1) dollars and (2) number of fares. (1) Break-even point (2) Break-even point (b) Without calculations, determine the contribution margin at the break-even point. Contribution margin at the break-even point Exercise 18-12 In 2013, Manhoff Company had a break-even point of $350,000 based on a selling price of $5 per unit and fixed costs of $112,000. In 2014, the selling price and the variable cost per unit did not change, but the break-even point increased to $420,000. Your answer is correct. Compute the variable cost per unit and the contribution margin ratio for 2013. Variable cost per unit Contribution margin ratio Your answer is correct. Compute the increase in fixed costs for 2014. Increase in fixed cost Exercise 18-14 Naylor Company had $210,000 of net income in 2013 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per unit data and total fixed costs to remain the same in 2014. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2014. Your answer is correct. Compute the number of units sold in 2013. Your answer is correct. Compute the number of units that would have to be sold in 2014 to reach the stockholders’ desired profit level. Your answer is correct. Assume that Naylor Company sells the same number of units in 2014 as it did in 2013. What would the selling price have to be in order to reach the stockholders’ desired profit level? New selling price Exercise 18-15 Your answer is correct. Cottonwood Company reports the following operating results for the month of August: sales $400,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 10% with no change in total variable costs or units sold. 2. Reduce variable costs to 45% of sales. Compute the net income to be earned under each alternative. 1. Net Income 2. Net Income Which course of action will produce the highest net income? Do It! Review 18-4 Your answer is correct. Presto Company makes radios that sell for $30 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $18 per unit. (a) Compute the break-even point in dollars using the contribution margin (CM) ratio. Break-even point (b) Compute the margin of safety ratio assuming actual sales are $800,000. Margin of safety (c) Compute the sales dollars required to earn net income of $140,000. Required sales Exercise 18-17 Oak Bucket Co., a manufacturer of wood buckets, had the following data for 2013. Sales 2,600 units Sales price $40 per unit Variable costs $16.00 per unit Fixed costs $19,500 Your answer is correct. What is the contribution margin ratio? Contribution margin ratio Your answer is correct. What is the break-even point in dollars? Break-even point