Clicker Question Preparation Guide Ch 5 Clicker questions will be asked in class based on your completion of this preparation guide Example in class question What is the answer to Question 1 b You will not have time to complete this guide in class 1 Johnston Company s high and low level of production volume was 60 000 units produced in May and 20 000 units produced in November Manufacturing facility maintenance costs were 156 000 in May and 60 000 in November The controller is working on preparing the company s maintenance cost budget for next year and has asked for your help analyzing this data 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 Hint You ll need to calculate the variable cost per unit and the total monthly fixed cost first 2 Match the items in the two columns below by entering the appropriate code letter in the space provided A B C D E Mixed costs Variable costs Fixed costs High low Method Relevant range F G H I Break even point Contribution Margin Margin of Safety Contribution Margin Ratio 1 The amount of revenue remaining after deducting the total variable cost of sales 2 Costs that contain both a variable and a fixed element 3 The percentage of sales dollars available to cover fixed costs and produce income is also referred to as the 4 The difference between actual or expected sales and sales at the break even point 5 Costs that vary in total directly and proportionately with changes in the activity level 6 The level of activity at which total revenues equal total costs 7 The range over which the company expects to operate during the year 8 Costs that remain the same in total regardless of changes in the activity level 9 A method that uses the total costs incurred at the high and low levels of activity 3 In the month of September Matlock Industries sold 800 units of their best selling product The average sales price was 30 During the month fixed costs were 6 300 and variable costs were 70 of sales a Determine the contribution margin per unit and the contribution margin ratio b Compute the break even point in dollars and in units c Compute the number of units Matlock would have to sell in order to earn net income of 27 000 d If the company s sales are expected to increase from the current level by 24 000 by how much will the company s net income increase assuming fixed costs are held constant
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