1) ABC Company is making a luxury furniture to order for a customer, but the customer has financial problems. And it is expected that ABC will not obtain any money from this customer in the future.

Costs incurred to date in producing the furniture are $2330. And ABC has received progress payments of $730 from the customer before his financial problems. ABC has contacted another customer who is willing to buy the furniture for $6,000 once it has been completed. To complete the remaining work of the furniture, the following costs would be incurred:

(a) Materials: Some wood has been bought at a cost of $645 and remained unused. If the furniture is not finished, remaining wood could be sold for $450. And the partly completed furniture would be sold for scrap for $800.

(b) Further labour costs would be $830. Labour is in short supply, and if the furniture is not finished, the work force would be switched to another job, which would earn $5,000 in revenue, and incur direct material costs of $1500, direct labour costs of $900 and absorbed (fixed) overhead of $800.

(c) Quality control inspection fees $650. If the furniture is not completed, the quality control contract would be cancelled at a cost of $200.

(d) General overheads of $1000 would be added to the cost of the additional work.

Required Assess whether the new customer's offer should be accepted

2)A company has recorded the following total costs during the last 5 years

Year. Output volume (units) Total costs ($)

2017 2,100 24,200

2018 2,050 23,100

2019 1,900 22,000

2020 2,200 25,000

2021 2,130 24,300

Required: (1) Use the high-low method to calculate the total costs that should be expected in 2022, if output of this year is 2350 units.

(2) Discuss the limitations of the High-low method in calculating fixed and variable costs.

3) Part 3 Cost-Volume-Profit Analysis

The ABC Ice Cream Shop sells ice cream cones.

The store's cost structure is as follows:

Fixed costs per month are $4,000.

Variable costs are $2.50 for a single scoop cone and $3.5 for a double scoop cone.

Required:

(1) If ABC only sells double scoop cones, and sells them for $5.50 per cone, what is the breakeven point in units?

(2) If ABC only sells single scoop cones, and charges $4.50 per cone, how many ice cream cones would ABC have to sell to make a profit of $2,000 per month?

(3) Assume that ABC wants to sell only double scoop cones, and believes it can sell 5,000 cones per month at $5 per cone. What would the variable cost per cone have to be for ABC to make a profit of $11,000 per month?

(4) Ignore Question (2) and refer to the original information. If ABC only sells single scoop cones, and sells 8,000 cones per month for $5 per cone, what is the margin of safety?

(5) Discuss the limitations of CVP analysis.