E5-1
Hall
Company manufactures a single product. Annual production costs incurred
in the manufacturing process are shown below for two levels of
production.
Costs Incurred
Production in Units 5,000 10,000
Production Costs Total Cost Cost/Unit Total Cost Cost per Unit
Direct Materials $8,250 $1.65 $16,500 $1.65
Direct Labor $9,500 $1.90 $19,000 $1.90
Utilities $1,500 $0.30 $2,500 $0.25
Rent $4,000 $0.80 $4,000 $0.40
Maintenance $800 $0.16 $1,100 $0.11
Supervisory salaries $1,000 $0.20 $1,000 $0.10
Match the definitions to the terms.
1. Remain constant in total, but vary on a per-unit basis.
2. Contain both a fixed element and a variable element. Vary both in total and on a per unit basis.
3. Vary in total but remain constant on a per-unit basis.
Variable costs
Fixed costs
Mixed costs
Classify each cost above as either variable, fixed, or mixed.
Direct Materials
Direct Labor
Utilities
Rent
Maintenance
Supervisory salaries
E5-9
The
Lake Shore Inn is trying to determine its break-even point. The inn has
50 rooms that are rented at $60 per night. Operating costs are as
follows:
Salaries $7,200 per month
Utilities $1,500 per month
Depreciation $1,200 per month
Maintenance $300 per month
Maid Service $8 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.
E6-7
Rapid
Auto has over 200 auto-maintenance service outlets nationwide. It
provides primarily two lines of service: oil changes and brake repair.
Oil change-related services represent 65% of its sales and provide a
contribution margin ratio of 20%. Brake repair represents 35% of its
sales and provides a 60% contribution margin ratio. The company's fixed
costs are $16,000,000 (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.
(Round computations for weighted-average contribution margin to 2
decimal places, e.g. 10.50, and final answers to 0 decimal places, e.g.
125.)
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? (Round answers to 0 decimal places, e.g. 125.)
E6-10
Mega
Electronix sells television sets and DVD players. The business is
divided into two divisions along product lines. CVP income statements
for a recent quarter's activity are presented below.
TV Division DVD Division Total
Sales $600,000 $400,000 $1,000,000
Variable costs 450,000 240,000 690,000
Contribution margin $150,000 $160,000 310,000
Fixed costs 124,000
Net income $186,000
Determine sales mix percentage and contribution margin ratio for each division. (Round answers to 2 decimal places, e.g. .50.)
Calculate the company's weighted-average contribution margin ratio. (Round answer to 2 decimal places, e.g. .50.)
Calculate the company's break-even point in dollars. (Use the rounded amount from the previous question when calculating the answer for this question.)
Determine the sales level in dollars for each division at the break-even point
