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Chapter 20: Q21E (page 1125)

Question: Determining total variable cost

For each variable cost per unit listed below, determine the total variable cost when units produced and sold are 25, 50, and 100 units.

Direct materials $ 40

Direct labor 80

Variable overhead 9

Sales commission 12

Short Answer

Expert verified

Answer

The total variable cost for 25 units is $3,525 per unit, for 50 units is $7,050 , for 100 units is $14,100 .

Step by step solution

01

Calculation of total variable cost per unit

Particulars

Amount

Direct materials

$40

Direct labor

$80

Variable overhead

$9

Sales commission

$12

Total variable cost per unit

$141

02

 Step 2: Calculation of fixed cost per unit

25

50

100

Variable cost per unit

$141

$141

$141

脳 No. of units

25

50

100

Fixed cost per unit

$3,525

$7,050

$14,100

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Most popular questions from this chapter

Question: Why is the calculation to determine the target profit considered a variation of the breakeven calculation?

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.

S20-14 Computing margin of safety

Refer to the original information (ignoring the changes considered in Short Exercises S20-12 and S20-13). If Funday Park expects to sell 8,100 tickets, compute the margin of safety in tickets and in sales dollars.

Computing margin of safety

Robbie鈥檚 Repair Shop has a monthly target profit of \(31,000. Variable costs are 20%of sales, and monthly fixed costs are \)19,000.

Requirements

1. Compute the monthly margin of safety in dollars if the shop achieves its income goal.

2. Express Robbie鈥檚 margin of safety as a percentage of target sales.

3. Why would Robbie鈥檚 management want to know the shop鈥檚 margin of safety?

What is the breakeven point?

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?

See all solutions

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