Problem

Different Costs for Different Purposes, Cost-Volume-Profit-Relationships

Hixson Company manufactures and sells one product for $34 per unit. The company maintains no beginning or ending inventories and its relevant range of production is 20,000 units to 30,000 units. When Hixson produces and sells 25,000 units, its unit costs are as follows:

Required:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 25,000 units? What is the total amount of period costs incurred to sell 25,000 units?

2. If 24,000 units are produced, what is the variable manufacturing cost per unit produced? What is the average fixed manufacturing cost per unit produced?

3. If 26,000 units are produced, what is the variable manufacturing cost per unit produced? What is the average fixed manufacturing cost per unit produced?

4. If 27,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?

5. What total incremental manufacturing cost will Hixson incur if it increases production from 25,000 to 25,001 units?

6. What is Hixsons contribution margin per unit? What is its contribution margin ratio?

7. What is Hixsons break-even point in unit sales? What is its break-even point in dollar sales?

8. How much will Hixsons net operating income increase if it can grow production and sales from 25,000 units to 26,500 units?

9. What is Hixsons margin of safety at a sales volume of 25,000 units?

10. What is Hixson degree of operating leverage at a sales volume of 25,000 units?

Amount per Unit Direct labor .. . $5.00 $1.00 2.50 $4.00 1.00 Fixed administrative expense._.... Variable administrative expense