Web ANSWERS Homework 2

# A list of some of the companys costs are below

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A list of some of the company’s costs are below; identify each cost as either Raw Materials (RM), Direct Labor (DL), Manufacturing Overhead (OH) or Period Cost (PC) and then as either a Variable Cost (VC) or Fixed Cost (FC). RM, DL, VC Item OH or PC or FC Cost of corn seeds RM VC Rent for farming equipment OH FC Cost of water for corn fields OH VC Rent on factory equipment OH FC Wages for factory production workers DL VC Wages for factory cleaning workers OH VC Salaries for administrative personnel PC FC Fuel for vehicles used for customer deliveries PC VC Production additives (e.g. enzymes and yeast) RM VC Use the data below to help answer the following questions; each question is independent of the others. Eco-Containers, Inc. Product Line Credit Cards Cups Containers Price per unit \$100 \$30 \$20 Totals Revenue \$2,500,000 \$1,065,000 \$1,248,000 Variable costs 1,981,250 516,525 825,552 Contribution margin 518,750 548,475 422,448 Fixed costs 60,000 130,000 200,000 Net income \$458,750 \$418,475 \$222,448

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A. What is the break-even point in units for each product line (rounded to the nearest whole unit)? Break-even = Fixed Costs / Contribution Margin per Unit (see data above for Fixed Costs and Sales Price) Volume 25,000 35,500 62,400 VC per unit 79.25 14.55 13.23 Break-even 2,892 8,414 29,542 B. The company is considering adding additional security features to the magnetic strips on its gifts cards. At current production levels, it would cost the company an additional \$300,000 to do so. The company intends to increase the product’s price to offset one-half of the additional cost. Despite the
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• Fall '07
• Verduzco
• Accounting, Net Income, product line, Eco-Containers, Inc.

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