Question 2 (30 marks)

A- Nour Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product which it sells at $86.35 per unit

Production volume		12,500	units		14,000	units
Direct materials	$	356,875		$	399,700
Direct labor	$	128,125		$	143,500
Manufacturing overhead (Mixed)	$	502,350		$	513,675
Fixed selling and administrative expenses	$	192,025		$	192,025

Required: Using high-low method and CVP analysis

1. Compute Nours breakeven point in units and dollars. Prove your answer

2. Compute how many units the company needs to sell to earn a profit of $ 600,000.

3. Compute the selling price per unit of the company if BEP (units) is 40,000 units and the variable cost per unit and total fixed cost does not change.

4. Explain the various methods used to estimate the variable component and the fixed component of the mixed cost (Excluding Scattergraph method) and state which method is the most accurate? Why?

(20 Marks)

B- The AAA Company, is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:

		Amount
Sales	$	1,176,000
Selling price per pair of skis	$	420
Variable selling expense per pair of skis	$	46
Variable administrative expense per pair of skis	$	15
Total fixed selling expense	$	145,000
Total fixed administrative expense	$	105,000
Beginning merchandise inventory	$	65,000
Ending merchandise inventory	$	115,000
Merchandise purchases	$	320,000

Required:

1. Prepare a traditional income statement for the quarter ended March 31.

2. Prepare a contribution format income statement for the quarter ended March 31.

3. What was the contribution margin per unit?

4. Which income statement format would be more useful in estimating how net operating income will change in responses to changes in unit sales? Why? (10 Marks)