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Chapter 20: Q1RQ (page 1119)
What is a variable cost? Give an example.
Variable costs are the costs that show consistency on per unit basis.
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The budgets of four companies yield the following information:
Company
Beach Lake Mountain Valley
Net Sales Revenue \( 1,615,000 \)(d) \( 1,050,000 \)(j)
Variable Costs (a) 60,000 525,000 100,800
Fixed Costs (b) 232,000 260,000 (k)
Operating Income (Loss) 285,600 (e) (g) 31,500
Units Sold 170,000 10,000 (h) (l)
Contribution Margin per Unit \( 3.80 \) (f) \( 75.00 \) 9.00
Contribution Margin Ratio (c) 80% (i) 30%
Requirements
1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.)
2. Which company has the lowest breakeven point in sales dollars?
3. What causes the low breakeven point?
Use the following information to complete Short Exercises S20-10 through S20-15.
Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at \(70 per person as a one-day entrance fee. Variable costs are \)42 per person, and fixed costs are \(170,800 per month.
Refer to the original information (ignoring the changes considered in Short Exercise S20-12). Suppose Funday Park increases fixed costs from \)170,800 per month to $231,000 per month. Compute the new breakeven point in tickets and in sales dollars.
Following is a list of costs for a furniture manufacturer that specializes in wood tables. Classify each cost as variable, fixed, or mixed relative to the number of tables produced and sold.
1. Wood used to build tables
2. Depreciation on saws and other manufacturing equipment
3. Compensation for sales representatives paid on a salary plus commission basis
4. Supervisor鈥檚 salary
5. Wages of production workers
On the CVP graph, where is the breakeven point shown? Why?
Preparing a contribution margin income statement
Gabelman Company sells a product for \(95 per unit. Variable costs are \)40 per unit, and fixed costs are $2,200 per month. The company expects to sell 570 units in September. Prepare an income statement for September using the contribution margin format
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