7/24/2019 cost estimation solutions.docx

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P2. LO 2 & 3a. Variable costs

Component costs $71,000Supplies 2,500

Assembly labor 25,000

Shipping 2,000Total $100,500

Variable cost per isc player !$100,500 " 150# $%70

Fixed costs

&ent $2,'00Super(isor salary 5,%00)lectricity '50Telephone 2*0+as '00

A(ertising 2,%00Aministrati(e costs 15,000Total $2%,'0

b. )-pecte cost in August $%70 !175# $2%,'0 $1',%*0

c. Contribution margin Selling price less (ariable cost $1,'00 / $%70 $%'0.

. )stimate proit at 175 units $1,'00 !175# / $%70 !175# / $2%,'0 $*',*20.

e. The special orer ill increase proit by !$1,050 / %70# 120 $5,%00.

P9. LO 2

a. rouction costs3

!$112,47* / $*',007# " !1'* 47# $7'1 (ariable cost per unit

$112,47* !$7'1 6 1'*# $12,100 i-e cost per month.

Selling an amin costs3

!$2*,0'0 / $22,45# " !1'* 47# $1'5 (ariable cost per unit

$2*,0'0 !$1'5 6 1'*# $4,00 i-e cost per month.

b. Sales !1,%50 units 6 $400# $1,*5,000

ess prouction costs

!$12,100 6 12# !$7'1 6 1,%50# 1,'51,'50

ess selling an amin. costs

!$4,00 6 12# !$1'5 6 1,%50# ''5,550

7/24/2019 cost estimation solutions.docx

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8ncome !loss# !$201,400#

P18. (LO 2 and Appendix)8ncrease in sales at normal prices $',000,000

ess 209 iscount %00,000

Increase in sales after discount 2,400,000 ess incremental costs .

0.5'0*2'' - $',000,000 1,542,7'8ncremental proit $ *07,527

:ote that since the regression as estimate using normal selling prices, theincremental costs must be calculate using normal selling prices.