Solutions%20to%20ch%2018%20and%2019%20demonstration%20problems[1]

Accounting: Tools for Business Decision Making

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BRIEF EXERCISE 18-1 Indirect labor is a variable cost because it increases in total directly and proportionately with the change in the activity level, and the cost per unit remains constant at $5. Supervisory salaries is a fixed cost because it remains the same in total regardless of changes in the activity level, and the cost per unit decreases with increases in activity. Maintenance is a mixed cost because it increases in total but not proportionately with changes in the activity level, and the cost per unit decreases with increases in activity. BRIEF EXERCISE 18-5 High Low Differen ce $65,0 00 $32,0 00 = $33,000 40,00 0 18,00 0 = 22,000 $33,000 ˜ 22,000 = $1.50 per unit. Activity Level High Low Total cost Less: Variable costs 40,000 X $1.50 18,000 X $1.50 Total fixed costs $65,0 00 60,00 0 000,0 00 $5,00 0 $32,0 00 27,00 0 $5,00 0
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BRIEF EXERCISE 18-6 1. (a) $100 ($260 – $160) (b) 38.5% ($100 ˜ $260) 2. (c) $360 ($500 – $140) (d) 28% ($140 ˜ $500) 3. (e) $1,200 ($360 ˜ 30%) (f) $840 ($1,200 – $360) BRIEF EXERCISE 18-7 FONTILLAS MANUFACTURING INC. CVP Income Statement For the Quarter Ended March 31, 2007 Sales. ........................................................................ $1,800,000 Variable costs ($750,000 + $95,000 + $79,000). ... 924,000 Contribution margin. .............................................. 876,000 Fixed costs ($540,000 + $60,000 + $70,000). ........ 670,000 Net income. .............................................................. $ 206,000
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EXERCISE 18-6 (a) Contribution margin in dollars: Sales = 3,500 X $30 =$105,000 Variable costs = $105,000
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Solutions%20to%20ch%2018%20and%2019%20demonstration%20problems[1]

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