Question

1. Mauro Products distributes a single product, a woven basket whose selling price is $22 per unit and whose variable expense is $19 per unit. The company’s monthly fixed expense is $8,100.

Required:

1. Calculate the company’s break-even point in unit sales.

2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.)

3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)

Mauro Products distributes a single product, a woven basket whose selling price is $22 per unit and whose variable expense is $19 per unit. The company’s monthly fixed expense is $8

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2. Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the variable and fixed portions of it car washing costs. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Month	Rental Returns		Car Wash Costs
January	2,300		$	10,400
February	2,500		$	12,800
March	2,700		$	11,200
April	2,900		$	13,400
May	3,600		$	15,600
June	4,900		$	22,100
July	5,500		$	21,600
August	5,300		$	20,700
September	4,700		$	22,200
October	3,800		$	19,300
November	2,100		$	10,100
December	2,600		$	12,100

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.

3.

Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 99,000 kilometers during a year, the average operating cost is 10.6 cents per kilometer. If a truck is driven only 66,000 kilometers during a year, the average operating cost increases to 11.9 cents per kilometer.

Required:

1. Using the high-low method, estimate the variable operating cost per kilometer and the annual fixed operating cost associated with the fleet of trucks.

2. Express the variable and fixed costs in the form Y = a + bX.

3. If a truck were driven 82,500 kilometers during a year, what total operating cost would you expect to be incurred?

Answer 1

find solution to first question;

1. break even point in unit sales = fixed costs / contribution per unit

here

fixed costs =$8,100.

contribution per unit =$22-19

=> $3 per unit

break even point = 8100/3

=>2,700 units.

2.break even point in dollar sales = fixed costs / (contribution per unit / sales price per unit)

=>8100 / (3/22)

=>$59,400.

3.if fixed expenses increase by $600,

new fixed expense =$8100+600

=>$8700.

break even point in units = $8700 / 3 =>2,900.units

break even point in sales dollars = $8700/(3/22)=>$63,800