Question

A) Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months: ( answered in2 decimal)

Month	Number of Cavities Filled	Total Cost
January	450	$5,250
February	575	6,250
March	700	6,500
April	300	5,300
May	500	5,950
June	350	5,300
July	600	5,600
August	675	6,500
September	425	5,200

Required:

1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled.

2. Using these estimates, calculate Mountain’s total cost for filling 400 cavities.

B) Riverside Inc. makes one model of wooden canoe. Partial information for it follows: (answered in 2 decimal)

Number of Canoes Produced and Sold
		495		645		795
Total costs
Variable costs	$	71,280		?		?
Fixed costs		149,600		?		?
Total costs	$	220,880		?		?
Cost per unit
Variable cost per unit		?		?		?
Fixed cost per unit		?		?		?
Total cost per unit		?		?		?

Required:

1. Complete the table.

3. Suppose Riverside sells its canoes for $518 each. Calculate the contribution margin per canoe and the contribution margin ratio.

4. Next year Riverside expects to sell 845 canoes. Complete the contribution margin income statement for the company.

C) Riverside Inc. makes one model of wooden canoe. Partial information for it follows: (answered in 2 decimals)

Number of Canoes Produced and Sold		550			750			900
Total costs
Variable costs	$	110,000		$	150,000		$	180,000
Fixed costs		99,000			99,000			99,000
Total costs	$	209,000		$	249,000		$	279,000
Cost per unit
Variable cost per unit	$	200.00		$	200.00		$	200.00
Fixed cost per unit		180.00			132.00			110.00
Total cost per unit	$	380.00		$	332.00		$	310.00

Riverside sells its canoes for $460 each. Next year Riverside expects to sell 1,000 canoes.

Required:

Complete the Riverside’s contribution margin income statement for each independent scenario. Assuming each scenario is a variation of Riverside’s original data. (Round your unit contribution margin and contribution margin ratio to 2 decimal places (i.e. .1234 should be entered as 12.34%) and all other answers to the nearest dollar amount.)

D) Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.64 per mile driven. Joyce has determined that if she drives 2,750 miles in a month, her total operating cost is $875. If she drives 3,850 miles in a month, her total operating cost is $1,139.

Required:

1. Using the high-low method, determine Joyce’s variable and fixed operating cost components.

2. Complete the contribution margin income statement for Joyce’s service assuming she drove 1,950 miles last month. (Assume this falls within the relevant range of operations).

D) The following information pertains to the first year of operation for Crystal Cold Coolers Inc.:

Number of units produced		2,900
Number of units sold		2,300
Unit sales price	$	330
Direct materials per unit	$	60
Direct labor per unit	$	50
Variable manufacturing overhead per unit	$	14
Fixed manufacturing overhead per unit ($217,500/2,900 units)	$	75
Total variable selling expenses ($11 per unit sold)	$	25,300
Total fixed general and administrative expenses	$	64,000

Required:

Prepare Crystal Cold’s full absorption costing income statement and variable costing income statement for the year.

Answer 1

ANS (A)
1	Calculation of Fixed Cost & Variable Cost
	Particulars	Ref	No. of Cavity	Cost
	Highest Cavity Filled	March	700	$6,500.00
	Lowest Cavity Filled	April	300	$5,300.00
	Calculation Of Variable Cost=		$6500-$5300
			700-300
			$3.00	per Unit
	Fixed Cost=		$6500-700x$3
			$4400
2	Total Cost for filling 400 Cavity
	Fixed Cost	$4400
	Variable Cost=400x$3	$1200
		$5600

ANS(B)	Completion of table of Riverside Inc.
	Number of canoes Produce and Sold
			495		645		795
	Total costs
	Variable Costs	$	71280.00		92880.00		114480.00
	Fixed Costs		149600.00		149600.00		149600.00
	Total costs	$	220880.00		242480.00		264080.00
	Cost Per Unit
	Variable Cost Per Unit		144.00		144.00		144.00
	Fixed Cost Per Unit		302.22		231.94		188.18
	Total Cost Per Unit		446.22		375.94		332.18
ANS-3	Contribution Margin per unit if Sale price of per Canoes is $518
	Sale Price		$518
	Variable Cost Per Unit		$144
	Contribution Margin per unit		$374
	Contribution Margin Ratio		72.20%
	Contribution/Sales
ANS-4	Contribution Margin On Sales of 845 Unit
	Sales =845*$518		$4,37,710.00
	Variable Cost=845*$144		$1,21,680.00
	Contribution		$3,16,030.00
ANS-C	Contribution Margin of Riverside
	Particulars		550 units		750 units		900 units		1000 units next year
			550		750		900		1000
	Sale@ $460 per unit		253000		345000		414000		460000
	Variable Cost@ $110 per unit		60500		82500		99000		110000
	Contribution Margin (revenue- variable Cost		192500		262500		315000		350000
	Fixed Cost		99000		99000		99000		99000
	Income(Contribution Margin-Fixed Cost)		93500		163500		216000		251000
	Contrbution per unit(varable)		350		350		350		350
	Contribution Ration(variable)		76.09%		76.09%		76.09%		76.09%
	Contrbution per unit(Fixed)		170		218		240		251
	Contribution Ration(Fixed)		36.96%		47.39%		52.17%		54.57%
ANS-D	Joyce ChargE from Clien per mile		$0.64
			Distance		Operating Cost
	Drive in a month		2750 miles		$875
	Drive in a month		3850 miles		$1139
	Variable cost per mile=		$1139-$875
			3850-2750
			0.24
	Fixed Cost=		$875-2750x$0.24
			215
	Income Statement for the 1950 miles
	Serives Charges		1248
	Variable Cost		468
	Contribution		780
	Fixed Cost		215
	Income		565