TXT.rtf - PRACTICETESTCH20,22&24 Northwest Office Co manufactures office furniture During the most productive month of the year 4,500 desks were

# TXT.rtf - PRACTICETESTCH20,22&24 Northwest Office Co...

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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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