Question 2

a. Using the data below, compute the variable and fixed cost elements using the high-low method. Show all calculations and clearly label the variable cost component and the fixed cost component of the mixed cost.

	Units Produced	Total Cost
July	20,000	$30,000
August	40,000	48,000
September	35,000	49,000
October	50,000	63,000
November	30,000	42,000
December	43,000	61,000

CABQ Inc. makes wallets that sell for $56 each. For the coming year, management expects fixed costs to total $320,000 and variable costs to be $42 per unit. Calculate the following items, being sure to show all calculations and clearly labeling your answers:

b. Contribution margin per unit

c. Contribution margin ratio (do not round answer)

d. Break-even point in units

e. Break-even point in dollars

f. What dollar sales will CABQ need to generate in order to realize a target profit of $410,000?