MGMT640 Homework 9 Latest 2021 January

MGMT640 Financial Decision Making for Managers

Homework 9

Question 1Thomas Train has collected the following information over the last six months.

Month  Units produced Total costs

March   10,000   $25,600

April       12,000   26,200

May       20,000   28,800

June      13,000   26,450

July        12,000   26,000

August  15,000   26,500

Using the high-low method, what is the variable cost per unit?

Round to two decimal places.

Question 2Rooter’s Cleaning Services provided data concerning the costs incurred to clean hotel rooms for which hotel customers pay $150 per night. Data for the past 7 months are as follows:

                January                February              March   April       May       June      July

Number of rooms cleaned           250         160         200         150         270         170         260

Cleaning cost     $6,450   $4,060   $5,100   $4,100   $6,640   $4,200   $6,530

How much are estimated monthly variable costs using the high-low method?

Round to two decimal places.

Question 3A cost is $3,600 at 1,000 units, $7,000 at 2,000 units, and $9,200 at 3,000 units. This cost is a

mixed cost

step cost

variable cost

fixed cost

Question 4Winny’s Office Furniture has a contribution margin ratio of 16%. If fixed costs are $182,800, how many dollars of revenue must the company generate in order to reach the break-even point?

Round to two decimal places.

Question 5Tim Taylor has written a self improvement book that has the following cost characteristics:

Selling Price        $16.00 per book

Variable cost per unit:   

Production          $4.00

Selling & administrative 2.00

Fixed costs:       

Production          $95,400 per year

Selling & administrative 23,400 per year

How many units must be sold to break-even?

Round to two decimal places.

Question 6The use of fixed cost to increase profits at a rate faster than sales increase is called:

“What if “ analysis

C-V-P analysis

operating leverage

contribution margin approach

Question 7Assume Sparkle Co. expects to sell 150 units next month. The unit sales price is $100, unit variable cost is $35, and the fixed costs per month are $5,000. The margin of safety in terms of sales revenue is:

Round to two decimal places.

Question 8Which of the following statements about the relevant range is true?

Cost functions outside the relevant range are usually linear

The relevant range is the normal length of time in a company’s accounting period

Estimates outside the relevant range are useful

Cost functions within the relevant range are assumed to be linear