Royal Enterprises has presented the following information for the past three months operations: MonthUnitsAverage CostJune2,400$10.00July4,800$6.00August6,000$5.20 a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 5,000 units produced?
What will be an ideal response?
a. High month: August; low month: June. Fixed cost = $19,200; Variable cost = $2.00 per unit. Variable cost = [(6,000 × $5.20) - (2,400 × $10)]/(6,000 - 2,400) = $2.00. Fixed cost = (6,000 × $5.20) - ($2.00 × 6,000) = $19,200
b. $29,200 = $19,200 + ($2.00 × 5,000)
Variable cost per unit is the difference in total cost divided by the difference in activity at the high and low activity points. Fixed cost is the total cost at one of those two points minus variable cost per unit, times activity at that point. To predict future cost, plug in the activity level to the firm's cost equation.
You might also like to view...
The production report for Phillips Industries, which had no beginning inventory at the beginning of the month, included the following information for September: Number of Units Completion Units started in production 81,000 . Units transferred to finished goods 72,000 . If the equivalent units for September's production were 77,400 . how many units were in process at the end of the month, and how
complete were they? a. 9,000 . 30% b. 9,000 . 60% c. 3,000 . 90% d. 6,000 . 90%
The financing activities section of the statement of cash flows does not include any transactions or activities from the income statement but does take into account stockholders' equity
Indicate whether the statement is true or false
Answer the following statements true (T) or false (F)
1. High-performing nonprofit organizations can have isolated impact. 2. McLaughlin writes that the models of service delivery are shifting from program innovation to program management. 3. A merger requires the total dissolution of one or more former organizations. 4. Ad hoc relationships are long term. 5. Volunteer emotions may be a deciding factor in a board of directors’ decision to merge with another organization.
Bryan Manufacturing had sales of $4,000,000 and net operating income of $700,000. Operating assets during the year averaged $600,000. The manager of Bryan is considering the purchase of a new machine which is expected to increase average operating assets by 8%. If the new machine is purchased, the company's new return on investment (ROI) would be:
A) 126.0% B) 16.2% C) 108.0% D) 92.6%