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4-3 High Low, Break Even Lancer Audio produces a high-end DVD player that sells for $1,300. Total operating expenses for the past 12 months are
4-3 High Low, Break Even Lancer Audio produces a high-end DVD player that sells for $1,300. Total operating expenses for the past 12 months are as follows -------------------------------------Units Produced ------ Sold Cost August ------------------------------------130------------- $116,990 September ------------------------------150 ---------------130,650 October---------------------------------- 155 ---------------133,790 November -------------------------------165 --------------- 140,345 December------------------------------- 170 ----------------143,910 January --------------------------------- 145 --------------- 127,670 February -------------------------------- 150 ----------------- 129,865 March -------------------------------------140----------------- 122,720 April ---------------------------------------135---------------- 120,255 May ---------------------------------------140 ----------------- 123,520 June -------------------------------------- 150 ----------------- 130,950 July ----------------------------------------145 ---------------- 127,385 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 165 units. d. Estimate total profit assuming production and sales of 165 units. e. Comment on the limitations of the high-low method in estimating costs for Lancer Audio.
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