# Pasevanto67

Brief Exercises: BE5-1,B E5-2, BE5-4
Exercises: E6-3, E6-5, E6-7
BE5-1
Monthly production costs in Pesavento Company for two levels of production are:
Cost 2,000 units 4,000 units
Indirect labor \$10,000 \$20,000
Supervisory salaries 5,000 5,000
Maintenance 4,000 7,000
Indicate which costs are variable, fixed, and mixed, and give the reason for each answer.
BE5-2
For Lobes Company, the relevant range of production is 40-80% of capacity. At 40% of capacity, a variable cost is \$4,000 and fixed cost is 6,000. Diagram the behavior of each cost within the relevant range assuming the behavior is linear
BE5-4
Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level.
Miles Driven Total Cost Miles Driven Total Cost
January 8,000 \$14,150 March 8,500 \$15,000
February 7,500 13,500 April 8,200 14,490
Compute the variable and the fixed cost element using the high-low method.
E6-3
Norton Company reports the following operating results for the month of August: sales \$310,000 (units 5,000); variable cost \$210,000 and fixed cost \$75,000. Management is considering the following independent courses of action to increase net income.
Increase selling price by 10% with no change in total variable cost or sales volume.
Reduce variable costs to 58% of sales.
Reduce fixed costs by \$20,000
E6-5
Hall Company had sales in 2014 of \$1,560,000 on 60,000 units. Variable costs totaled \$720,000, and fixed costs totaled \$500,000.
A new raw material is available that will decrease the variable costs per unit by 25% (or \$3.00). However, to process the new raw material, fixed operating costs will increase by \$150,000. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 5% increase in the number of units sold.
Instructions
Prepare a projected CVP income statement for 2014 (a) assuming the changes have not been made, and (b) assuming that changes are made as described.
E6-7
QwikReparis has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repairs: Oil change-related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 60% contribution margin ratio. The company’s fixed costs are \$16,000 (that is, \$80,000 per service outlet).
Instructions
Calculate the dollar amount of each type of service that the company must provide in order to break even.
The company has a desired net income of \$60,000 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet?