Question

PLEASE EXPLAIN PROBELM NUMBER 2 AND WHERE YOU GET THE NUMBERS FROM THANK YOU.

Question 1
Cereola Corp produces 2 products Model A & B.
Model A sells for $60 and has variable cost of goods sold for $15, variable selling and admin for $9 and sales of 1,000 units;
Model B sells for $40 and has variable cost of goods sold for $16, variable selling and admin for $6 and sales of 500 units.
The fixed expenses for the organization are $75,000.

a. What is the overall contribution margin for the expected sales mix?
b. What is the break-even point in units for the expected sales mix?
c. How many units of Model A and Model B should be sold at the break-even point?

Question 2
The following data pertains to activity and maintenance costs for two recent years:
Year 2 Year 1
Activity level 12,000 8,000
Machine Cost $15,000 $12,000

Using the high-low method, the cost estimation equation would be?

Answer 1

first,

variable portion under high low method = (high cost - low cost) / (high activity - low activity)

=> ($15,000-$12,000) / (12,000-8,000)

=>$0.75x................(where x will be number of units).

to find out fixed portion:

substitute $0.75 per unit variable portion at 12,000 units activity level

variable cost + fixed cost = total cost

=>$0.75*(12,000) + fixed portion = $15,000

=>fixed portion = $15,000-9,000

=>fixed portion =$6,000.

high low method cost estimation would be:

$6,000 + $0.75 x..................(x is the number of units).