P-01 Hours of operating time

5,000 6,000 7,000

Total cost:
Variable cost 20,000 24,000 28,000
Fixed cost 168,000 168,000 168,000
Total costs 188,000 192,000 196,000
Cost per hour:
Variable cost 4.00 4.00 4.00
Fixed cost 33.60 28.00 24.00
Total cost per hour 37.60 32.00 28.00

P-02 Month H/L Patient Cost

1 June High 1,900 15,200
November Low 1,100 12,800
Increase due to VC 800 2,400
Veriable cost per unit (2,400 800) 3.00
June total mixed cost 15,200
Less: Variable cost (1,900 x 3) 5,700
Total fixed cost 9,500

2 Y = a + bX Y = 9,500 + 3.00X

Q.01 Cups of coffee served in a week

1 2,000 2,100 2,200
Fixed cost 1,200 1,200 1,200
Variable cost @ 0.22 440 462 484
Total cost 1,640 1,662 1,684
Averaged cost per cup of coffee served 0.82 0.79 0.77

2 The average cost of a cup of coffee declines as the number of cups of coffee served increases
because the fixed cost is spread over more cups of coffee.

Q.03 Month H/L Days Cost

1 August High 2,406 5,148
October Low 124 1,588
Increase due to VC 2,282 3,560
Veriable cost per unit (3,560 2,282) 1.56
August total mixed cost 5,148
Less: Variable cost (2,406 x 1.56) 3,753
Total fixed cost 1,395

2 Electrical costs may reflect seasonal factors other than just the variation in occupancy d
For example, common areas such as the reception area must be lighted for longer perio
during the winter than in the summer. This will result in seasonal fluctuations in the fixe
 electrical costs.
Additionally, fixed costs will be affected by the number of days in a month. In other word
costs like the costs of lighting common areas are variable with respect to the number of
days in the month, but are fixed with respect to how many rooms are occupied during the mont
Other, less systematic, factors may also affect electrical costs such as the frugality of
individual guests. Some guests will turn off lights when they leave a room. Others will not.

Q.4 Sales 150,000

1 Less: Variable cost W-1 102,000
Contribution Margin 48,000
Less: Fixed cost W-2 28,000
Net operating income 20,000
Number of units sold (150,000 750) 200
W-1: Variable cost
Cost of goods sold 90,000
Selling Expenses (50 x 200) 10,000
Administrative expenses (10,000 x 20%) 2,000
Total variable cost 102,000
W-2: Fixed cost
Selling Expenses (30,000 - 10,000) 20,000
Administrative expenses (10,000 - 2,000) 8,000
Total fixed cost 28,000

2 Selling price per unit 750

Less: Variable cost per unit (102,000 200) 510
Contribution Margin per unit 240

Q.5 Units Produced and Sold

1 30,000 40,000 50,000
Total costs:
Variable costs 180,000 240,000 300,000
Fixed costs 300,000 300,000 300,000
Total costs 480,000 540,000 600,000
Cost per unit:
Variable cost 6.00 6.00 6.00
Fixed cost 10.00 7.50 6.00
Total cost per unit 16.00 13.50 12.00
2 Sales (45,000 x 16) 720,000
Less: Variable cost (45,000 x 6) 270,000
Contribution Margin 450,000
Less: Fixed cost \ 300,000
Net operating income 150,000

Q.11 Sales (40 x 3,125)

 1 Less: Cost of goods sold (40 x 2,450)
Gross profit
Less: Operating Expenses
Selling Exp:
Advertising 700
Sales Salaries & Commission (950 + 125,000 x 8%) 10,950
Delivery charges (40 x 30) 1,200
Utilities 350
Depreciation 800
Total selling expenses 14,000
Administrative Expenses:
Executive salaries 2,500
Insurance 400
Clerical (1,000 + 40 x 20) 1,800
Depreciation 300
Total administrative expenses 5,000
Total operating expenses
Net operating income
2
Sales (40 x 3,125)
Less: Variable cost
Cost of goods sold (40 x 2,450) 98,000
Sales Salaries & Commission (150,000 x 8%) 10,000
Delivery charges (40 x 30) 1,200
Clerical (40 x 20) 800
Total variable cost
Contribution Margin
Advertising 700
Sales Salaries & Commission 950
Utilities 350
Depreciation 800
Executive salaries 2,500
Insurance 400
Clerical 1,000
Depreciation 300
Total fixed cost
Net operating income

Q.12 Morrisey & Brown, Ltd.

1 Income Statements
For the Three Months Ended September 30
Jul Aug Sep
Sales in units 4,000 4,500 5,000
Sales revenue 400,000 450,000 500,000
Cost of goods sold 240,000 270,000 300,000
 Gross margin 160,000 180,000 200,000
Selling and administrative expenses:
Advertising expense 21,000 21,000 21,000
Shipping expense 34,000 36,000 38,000
Salaries and commissions 78,000 84,000 90,000
Insurance expense 6,000 6,000 6,000
Depreciation expense 15,000 15,000 15,000
Total selling and administrative expenses 154,000 162,000 170,000
Net operating income 6,000 18,000 30,000
Variable cost per unit remains the same over wide ranges of activity but the total cost goes up.
Fixed cost per unit goes down as activity level goes up but total remains cost same.
Mixed cost per unit goes down as activity level goes up but total cost goes up.

2 Shipping expense H/L Units Cost

High 5,000 38,000
Low 4,000 34,000
Increase due to VC 1,000 4,000
Veriable cost per unit (4,000 1,000) 4.00
High total mixed cost 38,000
Less: Variable cost (5,000 x 4) 20,000
Total fixed cost 18,000
Salaries and commissions H/L Units Cost
High 5,000 90,000
Low 4,000 78,000
Increase due to VC 1,000 12,000
Veriable cost per unit (12,000 1,000) 12.00
High total mixed cost 90,000
Less: Variable cost (5,000 x 12) 60,000
Total fixed cost 30,000

3 Sales (5,000 x 100)

Less: Variable cost
Cost of goods sold (5,000 x 60) 300,000
Shipping expense (5,000 x 4) 20,000
Salaries and commissions (5,000 x 12) 60,000
Total variable cost
Contribution Margin
Less: Fixed Cost
Advertising expense 21,000
Shipping expense 18,000
Salaries and commissions 30,000
Insurance expense 6,000
Depreciation expense 15,000
Total fixed cost
Net operating income
ating time
8,000

32,000 Working
168,000 Variable cost per unit = 20,000/5,000
200,000 Fixed cost per unit = 168,000/5,000
FIXED COST NOT CHANGED IF HOURS CHANGED = 168,000
4.00 VARIABLE COST PER UNIT NOT CHANGED
21.00 FIXED COST PER UNIT = 168,000/HOURS
25.00 TOTAL VARIABLE COST = HOURS X 4.00

offee served increases

ariation in occupancy days.

ighted for longer periods
fluctuations in the fixed
 a month. In other words,
spect to the number of
ccupied during the month.
ch as the frugality of
om. Others will not.

125,000
 98,000
27,000

19,000
8,000
Total VC P.U. Price P.U.
125,000 3,125

2,450
250
30
20
110,000 2,750
15,000 375

7,000
8,000

Per Unit
Jul Aug Sep
4,000 4,500 5,000
100.00 100.00 100.00
60.00 60.00 60.00 VARIABLE COST
 FIXED COST
8.50 8.00 7.60 MIXED COST
19.50 18.67 18.00 MIXED COST
FIXED COST
FIXED COST

ost goes up.

500,000

380,000
120,000

90,000
30,000