222 CH 5 HW Solutions 5th edition

222 CH 5 HW Solutions 5th edition - CHAPTER 5...

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Unformatted text preview: CHAPTER 5 Cost-Volume-Profit Homework Solutions ANSWERS TO QUESTIONS (3, 11, 17) 3. Fixed costs remain the same in total regardless of changes in the activity level. In contrast, fixed costs per unit vary inversely with activity. As volume increases, fixed costs per unit decline and vice versa. 11. Contribution margin is $12 ($40 – $28). The contribution margin ratio is 30% ($12 ÷ $40). 17. MALLON COMPANY CVP Income Statement Sales........................................................................................... $900,000 Variable expenses Cost of goods sold ($500,000 X .70)................................... $350,000 Operating expenses ($200,000 X .70)................................. 140,000 Total variable expenses................................................ 490,000 Contribution margin..................................................................... $410,000 SOLUTIONS TO BRIEF EXERCISES (1, 5, 6) BRIEF EXERCISE 5-1 Indirect labor is a variable cost because it increases in total directly and proportionately with the change in the activity level. Supervisory salaries is a fixed cost because it remains the same in total regardless of changes in the activity level. Maintenance is a mixed cost because it increases in total but not proportionately with changes in the activity level. BRIEF EXERCISE 5-5 High Low Difference $65,000 – $32,000 = $33,000 40,000 – 18,000 = 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 $65,000 60,000 000,000 $ 5,000 $32,000 27,000 $ 5,000 BRIEF EXERCISE 5-6 1. (a) $256 = ($640 – $384) (b) 40% ($256 ÷ $640) 2. (c) $210 = ($300 – $90) (d) 30% ($90 ÷ $300) 3. (e) $1,280 = ($320 ÷ 25%) (f) $960 ($1,280 – $320) SOLUTIONS TO DO IT! REVIEW EXERCISES (2, 4)SOLUTIONS TO DO IT!...
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This note was uploaded on 03/17/2012 for the course ACT 222 taught by Professor Pike during the Fall '10 term at Saint Louis.

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222 CH 5 HW Solutions 5th edition - CHAPTER 5...

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