Under absorption costing, a company had the following per unit costs when 10,000 units were produced.

$$\begin{array}{lr} \text{Directlabor}&\text{\$ 2}\\ \text{Direct materials}&\text{3}\\ \text{Variable overhead}&\underline{\text{\hspace{5pt}4}}\\ \text{Total variable cost}&\text{9}\\ \text{Fixed overhead (\$50,000/10,000 units)}&\underline{\text{\hspace{5pt}5}}\\ \text{Total product cost per unit}&\underline{\underline{\text{\$14}}}\\ \end{array}$$

The company sells its product for $50 per unit. Due to new regulations, the company must now incur$2 per unit of hazardous waste disposal costs and $8,500 per year of fixed hazardous waste disposal costs. Compute the contribution margin per unit. including hazardous waste disposal costs.

Under absorption costing, a company had the following per unit costs when 10,000 units were produced.

$$\begin{array}{lr} \text{Directlabor}&\text{\$ 2}\\ \text{Direct materials}&\text{3}\\ \text{Variable overhead}&\underline{\text{\hspace{5pt}4}}\\ \text{Total variable cost}&\text{9}\\ \text{Fixed overhead (\$50,000/10,000 units)}&\underline{\text{\hspace{5pt}5}}\\ \text{Total product cost per unit}&\underline{\underline{\text{\$14}}}\\ \end{array}$$

The company sells its product for $50 per unit. Due to new regulations, the company must now incur$2 per unit of hazardous waste disposal costs and $8,500 per year of fixed hazardous waste disposal costs. Compute the company's break-even point (in units). including hazardous waste disposal costs.

For the current year ended March 31, Chewy Company expects fixed costs of $900,000, unit variable cost of$75, and a unit selling price of $120.

b. Compute the sales (units) required to realize income from operations of$112,500.

Compare the monthly payments and total loan costs for the following pairs of loan options. Assume that both loans are fixed rate and have the same closing costs. Discuss the pros and cons of each loan.

You need a $\$ 180,000$ loan.

$\quad$ Option $1$: a $30$-year loan at an $\mathrm{APR}$ of $7.25 \%$

$\quad$ Option $2$: a $15$-year loan at $6.8\%$

Balen Operating Corporation plans to produce cowlings that will be sold at $20 per unit. Manufacturing any cowlings will cost an estimated$24,000 in fixed costs. The variable costs of producing each cowling are estimated to be $10. How many cowlings must they sell to break even? What sales must Balen earn on the cowlings to reach the break-even point?

For the current year ended March 31, Chewy Company expects fixed costs of $900,000, a unit variable cost of$75, and a unit selling price of $120.

b. Calculate the sales (units) required to realize income from operations of$112,500.

On a separate sheet of paper, write the letter of the key term that best matches each definition below. total fixed costs

$$\begin{matrix} \text{a. change in quantity supplied} & \text{ g. production function }\\ \text{b. diminishing returns } & \text{h. Law of Supply }\\ \text{c. fixed costs } & \text{ i. total cost }\\ \text{d. marginal analysis } & \text{ j. change in supply }\\ \text{e. marginal product } & \text{k. overhead }\\ \text{f. marginal revenue } & \text{ l. total product}\\ \end{matrix}$$

BeeGee Company, operating at full capacity, sold 150,000 units at a price of $116 per unit during the current year. Its income statement is as follows:

The division of costs between variable and fixed is as follows:

$$\begin{array}{lcc} & \text{Variable} & \text{Fixed} \\ \hline\text{ Cost of goods sold} & 80 \% & 20 \% \\ \text{Selling expenses} & 75 \% & 25 \% \\ \text{Administrative expenses} & 70 \% & 30 \% \end{array}$$

Management is considering a plant expansion program for the following year that will permit an increase of $3,625,000 in yearly sales. The expansion will increase fixed costs by$ 1,000,000 but will not affect the relationship between sales and variable costs.

Instructions

1. Determine the total variable costs and the total fixed costs for the current year.
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
3. Compute the break-even sales (units) for the current year.
4. Compute the break-even sales (units) under the proposed program for the following year.
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $ 4,400,000 of income from operations that was earned in the current year.
6. Determine the maximum income from operations possible with the expanded plant.
7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year?
8. Based on the data given, would you recommend accepting the proposal? Explain.

A hand tool manufacturer produces a product for which the variable cost is $\$ 5.35$ per unit and the fixed costs are $\$ 16,000$. The company sells the product for $\$ 8.20$ and can sell all that it produces. Find the total cost as a function of $x$, the number of units produced.

A company that manufactures running shoes has a fixed monthly cost of $300,000. It costs$30 to produce each pair of shoes. What is the horizontal asymptote for the graph of the average cost function,

$$\overline { C } ?$$

Describe what this represents for the company.

The Grovenor Candy Co. finds that the cost of making a certain candy bar is $0.13 per bar. Fixed costs amount to$2000 per week. If each bar sells for $0.35, find the minimum number of candy bars that will earn the company a profit.

Beck Inc. and Bryant Inc. have the following operating data:

a. Compute the operating leverage for Beck Inc. and Bryant Inc.

Refer to the information presented in the preceding exercise. Assume that Video Avenue can avoid $39,000 of direct fixed costs by dropping the DVD product line. Prepare a differential analysis to show whether Video Avenue should stop selling DVDs.

The following exercise demonstrate applications of linear functions. Analyze the information given to determine the equation of the relevant line or lines. Use the linear equation to determine the requested information. The Tie Shop sells its ties for $21 each. The shop has weekly fixed costs of$845, and each tie costs $12. How many ties must be sold to make a profit?