Question
a) Classify each cost element as either fixed, variable, or mixed b) Calculate: (i) the variable production cost per unit and the total fixed production
a) Classify each cost element as either fixed, variable, or mixed
b) Calculate: (i) the variable production cost per unit and the total fixed production overhead.
(ii) The total variable cost per unit and the total fixed costs Hint: Use the high-low method to separate mixed costs into their fixed and variable components.
c) Assuming sales of 5,000 units, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income.
Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) 4,000 6,000 Production Costs: Direct Materials $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials.. 25,000 37,500 Indirect Labour 40,000 50,000 Depreciation 20,000 20,000 Selling & Administrative Expenses: Sales Salaries 50,000 65,000 Office Salaries 30,000 30,000 Advertising 45,000 45,000 Other 15,000 20.000 Total $365.000 $477.500
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