Excel-16 - Exercise 2 - 6 High-Low Method of Analyzing...

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Exercise 2 - 6 High-Low Method of Analyzing Mixed Costs 1. Computations Units Produced Costs High 900,000 $63,000 ($0.07 * 900,000) Low 600,000 54,000 ($0.09 * 600,000) Difference 300,000 9,000 Change in total costs = $9,000 = $0.03 variable cost rate Change in volume 300,000 Total costs = Fixed costs + Variable costs $54,000 = X + 600,000 * ($0.03) $54,000 = X + 18,000 $36,000 = X Therefore, Total fixed costs = $36,000 Total variable costs = $18,000 at 600,000 copies 2. (800,000 * $0.03) + $36,000 = $60,000 total cost
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Exercise 16 - 8 Contribution Margin Income Statement 1. Contribution margin income statement Gordon Company Contribution Margin Income Statement For the Year Ended December 31, 2006 Sales revenue (10 units) $250 Less variable expenses: Direct materials $60 Direct labor 50 Manufacturing overhead 3 Selling expenses 45 Administrative expenses 25 183 Contribution margin $67 Less fixed expenses Manufacturing overhead $5 Selling expenses 30 Administrative expenses 15 $50 Profit $17 2. The contribution margin per unit is $6.70 ($67 / 10 units). If only 5 units had been sold the company would have lost $16.50 [$50 - (5 * $6.70)], because total fixed costs would not have been covered. Alternative calculation: Sales revenue ($25 * 5) $125.00 Variable costs ($18.30 * 5) 91.50 Contribution margin $33.50 Less fixed expenses 50.00 Loss $(16.50)
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Exercise 16-11 Contribution Margin Analysis Case I Case II Case III Sales volume (units) 24,000 (5) 40,000 16,000 Sales price per unit $10 $8 (9) $10 Variable costs (total) (1) $144,000 $200,000 $100,000 Contribution margin (total) (2) $96,000 (6) $120,000
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Excel-16 - Exercise 2 - 6 High-Low Method of Analyzing...

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