Question 1

A company has the following financial information:

year	Labour (in hours)	machine costs (in $)
2009	1,200	103,266
2010	1,225	110,216
2011	1,100	97,579
2012	1,050	94,581
2013	1,160	111,762
2014	1,200	115,786
2015	1,350	136,476
2016	1,380	141,852
2017	1,250	128,679
2018	1,270	135,334
2019	1,220	132,222

Required

Using the high-low method, what are the estimated machine costs

1. if there are 1,100 Labour hours?
2. if there are zero Labour hours?
3. What is a significant drawback to using the High-low method to calculate costs at zero labour hours?

Question 2

Given the following information:

Selling Price (per unit): $10,000

Variable Costs (per unit): $7,000

Fixed Costs: $200,000

Required

Each of these are separate situations:

1. What is the break-even point in total sales in dollars?
2. How many units need to be sold to make a profit of $20,000?
3. How many units need to be sold to make a profit of $20,000 if fixed costs increase from $200,000 to $250,000?
4. How many units would they need to sell if they wanted to double profit, if the current number of units sold is 200?

Question 3

Given the following information:

Deluxe Homes is a residential Home Builder. Based on their current production of 300 homes per year, their costs per unit are:

(in $000)

Direct labour $ 20

Direct materials 200

Variable overhead 30

Fixed overhead 40

Variable selling costs 10

Fixed selling costs 10

Total cost per unit $310

Required

Each of these are separate situations:

1. What is the cost per unit if production is increased to 400 homes per year, and there is an increase of $3.50 million in total fixed costs?

2. What is the cost per unit if production is decreased to 270 homes per year, and there is a decrease of $2.04 million in total fixed costs?