Problem 4.3(LO1,2)High-Low, Break-Even Lancer Audio produces a high-end AV receiver that sells for $1,300. 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 135 120,255

Required

1. Use the high-low method to estimate fixed and variable costs

2. Based on these estimates, calculate the break-even level of sales in units. (Round to the nearest whole unit.)

3. Calculate the margin of safety for the coming August assuming estimated sales of 175 units.

4. Estimate total profit assuming production and sales of 175 units.

5. Comment on the limitations of the high-low method in estimating costs for Lancer Audio.