# M5,6,10 Review

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ECON 122 Test II Test Review Identify whether the following (questions 1-6) is a variable, fixed, or mixed cost: 1. Eggs to bake a cake 2. Supervisor salary 3. Depreciation on ovens 4. Patents on recipes 5. Compensation for salesperson making salary and commission based on number of sales 6. Flour to bake cake Use the following information to answer questions 7-10 Machine Hours Total Costs 1000 \$1500 1200 \$1600 1500 \$1800 1900 \$2200 2000 \$2250 7. What is the variable cost per unit using the high-low method? 8. What is the total fixed cost using the high-low method? 9. What is the total cost formula (y = mx + b) for the information above? 10. What would be the total cost if 1100 units were produced? Use the following information to answer questions 11-20 ABC sold 200 units Each unit sells for \$100 Variable cost per unit is \$30 Total fixed costs are \$5000 Target profit is \$3000 11. What is the contribution margin per unit? 12. What is the total contribution margin? 13. What is the contribution margin ratio? 14. What is the operating income? 15. What is the breakeven in units? 16. What is the breakeven in sales dollars? 17. What are the target units sales to earn the target profit? 18. What are the target sales dollars to earn the target profit? 19. What is the margin of safety in units? 20. What is the margin of safety in dollars?
Use the same information above for the following questions (21-23) and treat each question independently: 21. If variable costs increase by \$10/unit, how will breakeven change? 22. If total fixed costs decrease by \$500, how will breakeven change? 23. If the selling price increase by \$10/unit, how will breakeven change? Use the following information to answer questions 24-27 Units produced 1000 units Units sold 800 units Direct materials \$20 per unit Direct labor \$40 per unit VMOH \$10 per unit FMOH \$5000 per year VS&A \$25 per unit FS&A \$3000 per year 24. What is the total unit product cost under absorption costing? 25. What is the total unit product cost under variable costing? 26. What is the operating income under absorption costing? 27. What is the operating income under variable costing? Use the following information to answer questions 28-35 ABC company has a capacity of 15,000 machine hours ABC company can produce 70 small units in an hour or 30 large units in an hour The small units have a VC/unit of \$15 and a selling price of \$20/unit The large units have a VC/unit of \$20 and a selling price of \$30/unit 28. What is the contribution margin per unit for small units? 29. What is the contribution margin per unit for large units? 30. What is the total contribution margin if we only produce small units? 31. What is the total contribution margin if we only produce large units? 32. What is the contribution margin per machine hour for small units? 33. What is the contribution margin per machine hour for large units? 34. Which unit should we make more of? 35. If there is a demand constraint of 750,000 small units and 400,000 large units, how many units of each should we produce? 36. ABC company makes 200 cakes per year and is thinking of outsourcing. They currently have DM of \$5/cake, DL of \$10/cake, VMOH of \$2/cake and total FMOH of \$1500. They can buy the cakes for \$25/cake from an outside vendor. Assuming none of the fixed costs can be avoided, should we make or buy? What are the cost associated with making and buying? 37. ABC company makes 200 cakes per year and is thinking of outsourcing. They currently have DM of \$5/cake, DL of \$10/cake, VMOH of \$2/cake and total FMOH of \$1500. They can buy the cakes for \$25/cake from an outside vendor. Assuming half of the fixed costs can be avoided, should we make or buy? What are the cost associated with making and buying?