ACC350-Determining mixed costs- the high low method

ACC350-Determining mixed costs- the high low method

Subject: Business    / Accounting
Question

E21-30 Determining mixed costs- the high low method

The manager of Quick Car Inspection reviewed the monthly operating costs for the past year. The costs ranged from $4,400 for 1,400 inspections to $4,200 for 1,000 inspections.

Requirements- In excel format

1. Calculate the variable cost per inspection

2. Calculate the total fixed costs

3.Write the equation and calculate the operating costs for 1,200 inspections

4. Draw a graph illustrating the total cost under this plan. Label the axes, and show the costs at 1,000, 1,200 and 1,400 inspections.

E21-31

For its top Managers, Global Travel formats its income statements as follows

Sales Revenue 318,500

Variable Costs 111,475

Contribution Margin 207,025

Fixed Costs 175,000

Operating Income 32,025

Globals’ relevant range is between sales of 250,000 and 360,000

1. Calculate the contribution margin ratio

2. Prepare two contribution margin income statements: one at the 250,000 level and the other at the 360,000 level.

E 21-37 Using sensitivity analysis

Intersection Driving School charges $500 per student to prepare and administer written and driving tests. Variable costs of $150 per student

include trainers wages, study materials and gasoline. Annual fixed costs of $140,000 include the training facility and fleet of cars.

Requirements:

1 For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units by first referring to the original data provided.

a. Breakeven point with no change in information

b.Decrease sales price to $250 per student

c. Decrease variable costs to $100 per student

d. Decrease fixed costs to $122,500

Compare the impact of changes in the sales price, variable costs, and fixed costs on the contribution margin per unit and the breakeven point in units.