art A

Silver Metals Ltd has presented the following information for the operations of its production

department in the past eight months

Month

April

May

June

July

August

September

October

November

Units

Produced

8.000

6.400

3.800

5.600

7,000

8.400

7,800

6.800

Total

Manufacturing

Overhead Cost

$30.400

$25,800

$18,300

$23.200

$26.000

$29.800

$26.500

$25.700

e

75%

Guestion

Required:

Using the high-low method, develop a cost equation by estimating the fixed cost per month and variable cost per unit, alculate the total overhead costs for a budgeted production of 5,000

units in the neyt month.

marks)

Part b

Explorer Tours Ltd generates average revenue of $5,000 per person on its one-week package tours to wildlife parks in China. Total annual fixed costs are $50,000. The variable costs per

person are:

Airfare

Hotel accommodations

Meals

Ground transportation

Park tickets and other costs

Total

$1,400

1,000

300

200

100

$3.000

@

Question 3

Required:

1. Calculate the number of tours that must be sold in order to break even. (4 marks)
2. Calculate the amol

F revenue needed to earn a target profit of $90,000. (4 marks)

(c) If fixed costs increase by $30,000, what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in (a) above? (4 marks)