Question 1 (Total 5 marks) Goodwill Co. has the following actual production data for the first four months of the year for the mixed costs incurred: Month Cost Units July $7,980 6,500 August $8,048 6,400 September $12,960 10,600 October $17.680 15,000 It uses the high-low method to analyze mixed costs. Required: a) What is the variable cost component? (1 mark) b) What is the fixed cost component? (1 mark) c) What is the cost function? (1 mark) d) What is the estimated total cost at an operating level of 10,000 units? (2 marks) Question 2 (Total 15 marks) Cheery Co. sells pillows for $50 each. The manufacturing cost, all variable, is $20 per pillow. The company is planning on renting an exhibition booth for both display and selling purposes at the annual crafts and art convention. The convention coordinator allows three options for each participating company. They are: 1. paying a fixed booth fee of $10,020, or 2. paying an $8,000 fee plus 10% of revenue made at the convention, or 3. paying 20% of revenue made at the convention. Required: a) Compute the breakeven sales in pillows of each option. (6 marks) b) Which option should Cheery Co.choose, assuming sales are expected to be 800 pillows? (4 marks) c) What is the margin of safety in units assuming 800 pillows is the planned sales level and option 1 is taken? (2 marks) d) Ignore part (band c), if company decides to pick option 1. Explain what effects this would have on a company's cost structure as well as assessing its business risk using Cost-volume-profit analysis. (3 marks) Note: show all your workings to support your answers. END