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Calculate the variable cost per unit and fixed costs
Course:- Managerial Accounting
Reference No.:- EM131115555




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1) CVP / Breakeven: Santa has decided to sell autographed pictures of his self this summer so he can have a little spare cash to spend on Mrs. Claus and maybe some of the good other little elfies.  It is going to cost him $48,000 to buy framing equipment, plus he has to pay a onetime "licensing" fee of $10,000 to Frosty Da Snowman for protection.  Each frame will cost $2 for the glass, $6 for the framing material, $1 for the backing, and $3 for the other materials.  On the off-season Santa pays the elfs $25 per hour.  They make 5 frames an hour.  Santa figures he'll sell the autographed pictures for a whopping $37 each.

Mrs. Claus thinks he has been eating too many cookies and should forget the whole deal.  But good ol' Santa says "Hey honeycakes, don't worry about it all I have to do is sell _________of these pictures and we make back all the investment.  Then he says in fact, if we sell _________ pictures we will have made $24,000.

Required:  What are the numbers for the "blanks" above? 

2) High / Low Cost Estimating:  Bing-Bang-Boozle Inc.  makes plastic beer cups for tailgating, nice fan decals and all that.  They had the following overhead costs:


Machine Hours

Overhead Cost

January

100

5400

February

160

7200

March

250

9900

April

110

5700

May

180

7800

June

150

6900

July

120

6000

1. Using the High-Low method calculate the variable cost per unit and fixed costs.

2. If the activity in August was 200 machine hours, what would the high-low method predict the overhead cost would be?




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