Chapter 18: Q18QS (page 835)
Refer to Vijay Company’s data in QS 18-17. Compute its product cost per unit under variable costing.
Product cost per unit under variable costing is$40.
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Apple produces tablet computers for sale. Identify some of the variable and fixed product costs associated with that production.
Sun Co.’s monthly unit sales and total cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs. (Dollar and unit amounts are in thousands.)
Month | Unit sold | Total cost | Month | Unit sold | Total cost |
1 | 195 | \(97 | 7 | 145 | \)93 |
2 | 125 | 87 | 8 | 185 | 105 |
3 | 105 | 73 | 9 | 135 | 85 |
4 | 155 | 89 | 10 | 85 | 58 |
5 | 95 | 81 | 11 | 175 | 95 |
6 | 215 | 110 | 12 | 115 | 79 |
Required
1. Prepare a scatter diagram for these data with sales volume (in units) plotted on the horizontal axis and total costs plotted on the vertical axis.
2. Estimate both the variable costs per unit and the total monthly fixed costs using the high-low method. Draw the total costs line on the scatter diagram in part 1.
3. Use the estimated line of cost behavior and results from part 2 to predict future total costs when sales volume is (a) 100 units and (b) 170 units.
Hudson Co. reports the contribution margin income statement for 2017 below. Using this information, compute Hudson Co.’s (1) break-even point in units and (2) break-even point in sales dollars.
HUDSON CO. | |
Contribution margin income statement | |
For the year ended December 31, 2017 | |
Sales (9,600 units @ \(225 each) | \)2,160,000 |
Less: Variable cost (9,600 units @ \(180 each) | 1,728,000 |
Contribution margin | 432,000 |
Less: Fixed cost | 324,000 |
Pre-tax income | \)108,000 |
A recent income statement for BMW reports the following (in € millions). Assume 75 percent of the cost of sales and 75 percent of the selling and administrative costs are variable costs, and the remaining 25 percent of each is fixed. Compute the contribution margin (in € millions). (Round computations using percentages to the nearest whole eur)
| BMW Automobile Group | |
| Sales | €92,175 |
| Cost of sales | 74,043 |
| Selling and administrative expenses | 8,633 |
Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. Each racket was sold at a price of \(90. Fixed overhead costs are \)78,000, and fixed selling and administrative costs are \(65,200. The company also reports the following per unit costs for the year. Prepare an income statement under absorption costing.
Variable production cost | \)25 |
Variable selling and administrative expenses | $2 |
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