1. Your parents are preparing a special party. They expect to incur the following costs:
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Dinner (per person)
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$15
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Program and favors (per person)
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$3
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Band
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$2,000
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Tent rentals
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$5,000
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Cleaning crew
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$1,000
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Your parents would like to charge $30 per person. How many tickets would your parents need to sell to break-even?
Assume that only 200 people are expected to attend. What price per ticket must be charged to break-even?
2. The following maintenance hours and maintenance costs were collected for the months of January through June:
Hours of maintenance Maintenance costs
January 625 $7,950
February 450 $7,400
March 700 $8,275
April 550 $7,625
May 775 $9,100
June 850 $9,800
1) Using the high/low method calculate the variable cost per unit.
2) Using the high/low method calculate the total fixed costs.
3) Using the results above, what is the expected maintenance costs for July if the estimated maintenance hours are 900?
3. Escareno Corporation has provided its contribution format income statement for June.
The company produces and sells a single product
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Sales (8,400 units)
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$764,400
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Variable expenses
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445,200
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Contribution margin
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319,200
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Fixed expenses
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250,900
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Net operating income
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$ 68,300
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If the company sells 8,000 units, what will its contribution margin be?
4. Wilson Company prepared the following preliminary budget assuming no advertising expenditures:
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Selling price
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$10 per unit
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Unit sales
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100,000
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Variable expenses
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$700,000
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Fixed expenses
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$200,000
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Based on a market study, the company estimated that it could increase the unit selling price by 10% and increase the unit sales volume by 10% if $100,000 were spent on advertising. Assuming that these changes are incorporated in its budget, what should be the budgeted net operating income?
5. Larson Brothers, Inc., used the high-low method to derive its cost formula for electrical power cost. According to the cost formula, the variable cost per unit of activity is $3 per machine-hour. Total electrical power cost at the high level of activity was $7,600 and at the low level of activity was $7,300. If the high level of activity was 1,200 machine hours, then the low level of activity was:
6. The following costs are budgeted for Chana Corp: Total variable costs 350,000 Total fixed costs 240,000. Total costs 590,000. The costs above are based on a level of activity of 10,000 units. Assuming that this activity is within the relevant range, what would total costs be for Ghana if the level of activity was 12,000 units?