Lancer Audio produces a high-end DVD player that sells for $1,300.Total operating expenses for the past 12 months are as follows:

Required
a. Use the high-low method to estimate fixed and variable costs.
b. Based on these estimates, calculate the break-even level of sales in units. (Round to the nearest whole unit.)
c. Calculate the margin of safety for the coming August assuming estimated sales of 175 units.
d. Estimate total profit assuming production and sales of 175 units.
e. Comment on the limitations of the high-low method in estimating costs for Lancer Audio.

Transcribed Image Text:

Units Produced and Sold 165 130 150 145 155 170 140 150 145 150 140 135 Cost $140,345 August September October November December January February March April May June 116,990 130,650 127,670 133,790 143,910 123,520 130,950 127,385 129,865 122,720 120,255 Ul