Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Part A Connex Bus Company has incurred the following maintenance costs in the last six months. Month Distance Travelled (km) Maintenance Cost ($) January 19,800
Part A Connex Bus Company has incurred the following maintenance costs in the last six months. Month Distance Travelled (km) Maintenance Cost ($) January 19,800 5,600 February 20,000 5,500 March 14,500 5,250 April 12,400 4,980 May 11,600 4,720 June 10,000 4,500 Using the high-low method, determine the variable cost per km travelled and the fixed cost per month (6 marks) Using the answer from Question 3 Part A (a), estimate the maintenance cost for a month in which the distance travelled is 16,000 km. (4 marks) Describe any three (3) drawbacks of the high-low method of cost estimation. (3 marks) Part B Corex Company produced and sold 80,000 bags during the year 2018 at $65 per unit. Total fixed cost was $1,080,000 while variable production cost was $25 per unit and variable selling cost was $5 per unit. Use cost-volume profit analysis to prepare a contribution margin income statement for the year 2018. (7 marks) After preparing the contribution margin income statement, management determined the variable production costs would increase by 20% and the variable selling costs would increase by $1 per unit. However, to keep the products competitively priced, management decided not to change the selling price of the bags. Use cost-volume-profit analysis to determine how many bags the company must sell to breakeven
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started