Question

Sam's Souvenirs, Inc. sells souvenirs for $25 each. Sam's pays rent of $165 per month. Its raw materials cost $9 and its direct labor costs $6 for each souvenir. Two of Sam's recent electrical utility bills were as follows:

Electric Utility Bills

Month	production output	cost ($)
May	20	75
June	30	95

a. What is the mixed cost?

b. What is the fixed portion of mixed cost?  

c. What is the variable portion of mixed cost?  

d. What is the total fixed cost?  

e. What is the total variable cost?  

f. What is her breakeven point, in number of tricycles (per month)?  

Answer 1

a. Mixed cost also known as semi variable cost is a cost which have both component of fiaxed cost as well as variable cost. In the present question Electric utility bill is mixed cost.

b. Variable Portion of Mixed Cost = (Cost in june - Cost in May) / (Units in June - Units in May) = (95-75) / (30-20)

= 20/10 or $ 2 per unit

Fixed Cost portion = Cost in June - (Variable cost per unit *Units) = 95 - (2*30) = $ 35

c.. Variable Cost Portion in mixed cost = $ 2 per unit

d. Total Fixed Cost = Rent Paid + Fixed Portion of mixed cost = $ 165 + 35 = $200

e. Total Variable Cost = Direct Material Cost + Direct Labour Cos + Variable elecment of mixed cost = 9 + 6 + 2= $17

f. Break Even Point = FIxed Cost / (selling price per unit - Variable cost per unit)

= 200 / (25-17) = 200 / 8 = 25 units