Question

18.

Madison Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were $104,000 in May and $50,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units.

Select one:

A. $78,000

B. $112,000

C. $83,750

D. $60,750

E. None of the above.

21.

Paul Company sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $90,000. How many MP3 players must Paul sell to earn net income of $210,000?

Select one:

A. 15,000.

B. 5,250.

C. 3,750.

D. 4,500.

E. None of the above

23

Train's, Inc. plans to sell 4,000 backpacks during May; 3,800 in June, and 5,000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Train's produce during June?

Select one:

A. 3,980

B. 4,550

C. 3,620

D. Not enough information to determine.

E. None of the above.

Answer 1

Q.18	Correct Option C i.e. $83750
		Level of Activity	Maintenance Costs
	High Level	60,000	104,000
	Low Level	20,000	50,000
	Change	40,000	54,000
	Change per unit (Variable cost) = Change in total cost / Change in Units Sold
				=(54000/40000)
				1.35
	Fixed Cost calculation
	Variable Cost + Fixed cost = Total cost
	1.35 * 20000 + Fixed Cost = 50000
	Fixed Cost = $23000
	Total Maintenance cost for production = 45000*1.35+23000
	83750
Q.21	Correct Option A i.e. 15000 Units
	Target Units = (Fixed cost + Target income )/Contribution per unit
	=(90000+210000)/20
	15,000
Q.23	Correct Option A i.e. 3980 Units
		May	June	July
	selling units	4,000	3,800	5000
	Add: Ending Inventory	570	750
	Total available	4,570	4,550
	Less: Beginning Inventory	570
	Units to be produced		3,980