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.

 

 

 

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