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Review 18-1
Helena Company reports the following total costs at two levels of production.

Classify each cost as variable, fixed, or mixed.
5,000 Units
10,000 Units
Indirect labor
$ 3,000
$ 6,000
Property taxes
7,000
7,000
Direct labor
28,000
56,000
Direct materials
22,000
44,000
Depreciation
4,000
4,000
Utilities
5,000
7,000
Maintenance
9,000
11,000

Exercise 18-4
Your answer is correct.
Family Furniture Corporation incurred the following costs.

Identify the costs as variable, fixed, or mixed.
1.
Wood used in the production of furniture.
2.
Fuel used in delivery trucks.
3.
Straight-line depreciation on factory building.
4.
Screws used in the production of furniture.
5.
Sales staff salaries.
6.
Sales commissions.
7.
Property taxes.
8.
Insurance on buildings.
9.
Hourly wages of furniture craftsmen.
10.
Salaries of factory supervisors.
11.
Utilities expense.
12.
Telephone bill.

Exercise 18-6
PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively.
Production in Units
3,000
Production Costs
Direct materials
$7,500
Direct labor
18,000
Utilities
2,100
Property taxes
1,000
Indirect labor
4,500
Supervisory salaries
1,900
Maintenance
1,100
Depreciation
2,400

Your answer is correct.
Identify the above costs as variable, fixed, or mixed.
Cost
Direct materials
Direct labor
Utilities
Property taxes
Indirect labor
Supervisory salaries
Maintenance
Depreciation

Your answer is correct.
Calculate variable costs per unit, variable cost per unit for utilities and variable cost per unit for maintenance.
Variable cost per unit
Variable cost per unit for utilities
Variable cost per unit for maintenance

Your answer is correct.
Calculate the expected costs when production is 5,000 units.
Cost to produce 5,000 units

Do It! Review 18-2
Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level.
Units Produced
Total Cost
March
10,000
$18,000
April
9,000
16,650
May
10,500
18,580
June
8,800
16,200
July
9,500
17,100

Your answer is correct.
Compute the variable cost per unit using the high-low method.
Variable cost per unit

Your answer is correct.
Compute the fixed cost elements using the high-low method.
Fixed cost

Your answer is correct.
Estimate the total cost if the company produces 9,200 units.
Total cost to produce 9,200 units

Exercise 18-3
The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
Month
Total Maintenance Costs
Total Machine Hours
January
$2,500
300
February
3,000
350
March
3,600
500
April
4,500
690
May
3,200
400
June
4,900
700

Your answer is correct.
Determine the variable cost components using the high-low method.
Variable cost per machine hour

Your answer is correct.
Determine the fixed components using the high-low method.
Total fixed costs

Exercise 18-13
Your answer is correct.
Cannes Company has the following information available for September 2014.
Unit selling price of video game consoles
$400
Unit variable costs
$275
Total fixed costs
$52,000
Units sold
600

(a) Compute the contribution margin per unit.
Contribution margin per unit

(b) Prepare a CVP income statement that shows both total and per unit amounts.
CANNES COMPANY
CVP Income Statement
For the Month Ended September 30, 2014
Total
Per Unit

(c) Compute Cannes’ break-even point in units.
Break-even point in units
units

(d) Prepare a CVP income statement for the break-even point that shows both total and per unit amounts.
CANNES COMPANY
CVP Income Statement
For the Month Ended September 30, 2014
Total
Per Unit

Do It! Review 18-3
Your answer is correct.
Larissa Company has a unit selling price of $250, variable cost per unit of $170, and fixed costs of $140,000.

Compute the break-even point in units using (a) the mathematical equation and (b) contribution margin per unit.
(a) Mathematical Equation
(b) Contribution margin per unit
Break-even point
units
units

Exercise 18-8
Your answer is correct.
All That Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows.
Depreciation
$1,400
per month
Advertising
$200
per month
Insurance
$2,000
per month
Weed and feed materials
$12
per lawn
Direct labor
$10
per lawn
Fuel
$2
per lawn

All That Blooms charges $60 per treatment for the average single-family lawn.

Determine the company’s break-even point in (a) number of lawns serviced per month and (b) dollars.
(a)
Break-even point
(b)
Break-even point

Exercise 18-9
Your answer is correct.
The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.
Salaries
$6,200
per month
Utilities
$1,100
per month
Depreciation
$1,000
per month
Maintenance
$100
per month
Maid service
$11
per room
Other costs
$28
per room

Determine the inn’s break-even point in (1) number of rented rooms per month and (2) dollars.
(1)
Break-even point
(2)
Break-even point

Exercise 18-10
Your answer is correct.
In the month of March, Style Salon services 560 clients at an average price of $120. During the month, fixed costs were $21,024 and variable costs were 60% of sales.

(a) Determine the contribution margin in dollars, per unit, and as a ratio.
Contribution margin
Contribution margin per unit
Contribution margin ratio

(b) Using the contribution margin technique, compute the break-even point in dollars and in units.
Break-even sales
Break-even sales