PRACTICE TEST - CH 20, 22 & 24 Northwest Office Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $101,000. In its slowest month, the company made 1,100 desks at a cost of $67,000. Using the high-low method of cost estimation, total fixed costs in August are: A: 56,000 High level 4,500 - low level 1,100 = 3,400 unit change. High cost $101,000 - low cost 67,000 = $34,000 change wtih a change of 3,400 units. Var. Cost = $10 unit TC= units produced X unit var. cost + fixed cost 101,000 = 4,.500 X $10 + fixed cost 101,000 = 45,000 + fixed cost 56,000 = fixed cost BigSA company has fixed costs of $410,000, variable costs were 70% of sales, and sales were $2,000,000. Operating profit would be: A:190,000 Sales $2,000,000 - VC of $1,400,000 = Contribution Margin of $600,000. Contribution Margin - Fixed costs = Operating Profit If fixed costs are $1,700,000, the unit selling price is $320, and the unit variable costs are $220, what is the amount of sales required to realize an operating income of $400,000? A: 21,000 units With a sales price of $320 and variable cost of $220 you have a $100 unit contribution margin. To have a $400,000 operating income AFTER subtracting the $1,700,000 of cost fixed cost you need a $2,100,000 contribution margin and since the UNIT contribution margin is $100 you would need sales of 21,000 units
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