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Katie Answer: (a) BE = \$125,000/.40 = \$312,500 Estimated sales = 25,000 units X \$16.50 = \$412,500 Margin of safety = (\$412,500 – 312,500)/412,500 = 24.2% (b) CM = \$412,500(.40) = \$165,000 Operating profits = \$165,000 – 125,000 = \$40,000 Operating leverage = \$165,000/40,000 = 4.125 AMG Answer: Weighted average CM = [(15-9)(1) + (10-7)(4) + (5 – 4.50)(8)]/(1 + 4 + 8) = \$1.69231 BE = \$75,000/1.69231 = 44,319 total units A = 44,319 × (1/13) = 3,410 M = 44,319 × (4/13) = 13,637 G = 44,319 × (8/13) = 27,274 RST Answer: Variable overhead costs (2008) = .80(\$112,500) = \$90,000 Fixed overhead costs (2008) = \$235,000 - \$90,000 = \$145,000 ___2008___ ___2009___ Direct materials \$ 112,500 \$ 103,500 (1) Direct labor 175,000 140,000 (2) Variable overhead costs 90,000 82,800 (3) Fixed overhead costs 145,000 155,875 (4) Total \$ 522,500 \$ 482,175 (1) [(\$112,500)/25,000)(1.15)](20,000) = \$103,500 (2) (\$175,000/25,000)(20,000) = \$140,000 (3) [(\$90,000)/25,000)(1.15)](20,000) = \$82,800 (4) (\$145,000)(1.075) = \$155,875 2008 unit cost: \$522,500/25,000 = \$20.90 2009 unit cost: \$482,175/20,000 = \$24.11

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Teal Answer: (A) Utilities per hour = \$137,700/9,000 = \$15.30 per direct labor hour Utility cost at the high point = \$15.30(10,500) = \$160,650 Utility cost at the low point = \$15.30(6,000) = \$91,800 Maintenance cost at the high point = \$340,500 – 80,000 – 160,650 = \$99,850 Maintenance cost at the low point = \$234,000 – 80,000 – 91,800 = \$62,200 Maintenance cost per hour = (\$99,850 – 62,200)/(10,500 – 6,000) = \$8.36667 Fixed Maintenance costs per month = \$99,850 – (\$8.36667) × (10,500) = \$12,000 Total maintenance costs = \$12,000 + \$8.36667 per Direct Labor Hour (B) Total overhead costs = (\$80,000 + \$61,350) + [(\$15.30 + 8.36667) x Direct Labor Hours = \$141,350 + \$23.36667 per Direct Labor Hour
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