Prepared by DR - Hassan Sweillam University of 6 of October, Egypt
Prepared by DR - Hassan Sweillam University of 6 of October, Egypt
Prepared by DR - Hassan Sweillam University of 6 of October, Egypt
Dr.Hassan Sweillam
University of 6th of October, Egypt
7-1
Exercise 1:
Mixed cost function
Machine Hours Maintenance Cost ( Y ) Cost per hour
(X) (b)
1000 $8,000 $8
3000 $12,000 $4
= 12,000 – 8,000
3,000 – 1,000
7-3
How to analyze mixed costs
into variable and fixed?
Step 2:
Compute the fixed cost element as the difference between total
cost at the particular level and the variable cost at this level
Total cost =
Total fixed cost ( a ) +( b ) Variable cost per unit * (x)Number of
units
y= a + b x
a= y – b x
Fixed cost (a)= $8,000 – ($2 x 1,000) = $ 6,000
Or = $12,000 – ($ 2 x 3,000) = $ 6,000
7-4
Exercise 2:
6th Oct, Company compiled the following financial information in USD $:
7-8
Solution:
4- Break-even units
Total fixed cost $120,000
120,000
Break-even sales dollars= -----------------
40
Break-even units = 3000
7-9
Exercise 3:
The following is the income statement under the contribution
margin approach for the year ended 12/31/2015:
Units of sales 4000 units
7-11
Solution :
a) Increasing advertising expense by $50,000 which is expected
to increase sales by 10%
Contribution margin income statement for the year 2016
Units of sales 4400 units Percentage Changes
7-15
Solution:
Step 1- Contribution margin ratio
Unit sale price $60 100%
7-17
Solution:
3- Break-even units
Total fixed cost $360,000
360,000
Break-even sales dollars= -----------------
24
Break-even units = 15000
7-18