High-Low, Break-even: Lancer Audio produces a high-end AV receiver that sells for $1300.

Total operating expenses for the past 12 months are as follows:

Units Produced and Sold/Cost : August 165 / $140,345

September 130/$116,990

October 150/ $130,650

November 145 /$127,670

December 155/ $133,790

January 170 /$143,910

February 140/ $123,520

March 150 /$130,950,

April 145 /$127,385,

May 150 /$129,865,

June 140/ $ 122,720,

July 135/ $120,225

Units produced and sold 150:

Component costs $71,000 Supplies 2,500

Assembly labor 25,000 Rent 2,300 Supervisor salary 5,600

Electricity 350 Telephone 280 Gas 300 Shipping 2,000

Advertising 2,600 Administrative costs 15,000

TOTAL $126,930

questions:

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 175 units

d) Estimate the total profit assuming production and sales of 175 units

e) Comment on the limitation of the high-low method in estimating costs for Lancer audio.