1. Fill in the blanks:

Part	Sales	Fixed Costs	Variable Costs	Total Costs	Contribution Margin %	Operating Income
A.	$3,000	$1,300	$1,200	$2,500	60%
B.	$4,000		$1,200	$4,000	70%	$0
C.	$6,000	$900	$4,500	$5,400		$600
D.		$600	$1,000	$1,600	75%	$2,400

2. Berhannans Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and administrative costs total $2,500.

a. What is the contribution margin per phone?

b. What is the breakeven point in phones?

c. How many phones must be sold to earn a targeted profit of $7,500?

3. Total fixed costs are $25,000 per year. The variable cost per unit is $10.00 per unit up to 5,000 units per year and $7.50 per unit thereafter.

a. Develop a cost function for this cost.

b. What could cause the change in variable costs shown above? Explain.

c. List three assumptions that are made when developing these types of cost functions and give one reason that each assumption might not hold.