Question 4.1 (Total: 12 marks)

The following information summarizes the company's cost structure

Variable cost per unit	$2.20
Fixed cost per unit	6.10
Total cost per unit	8.30
Units produced and sold	58,000

Assume that all of the activity levels mentioned in this problem are within the relevant range.

a schedule showing predictions for the following items at the 50,000 unit level of activity:

Required:

1. Total variable cost.
2. Total fixed cost.
3. Variable cost per unit.
4. Fixed cost per unit.

Question 4.2 (Total: 16 marks)

The following is Starfish Corporation's contribution format income statement for December 2023:

Sales	$1,000,000
Less: Variable expenses	300,000
Contribution margin	800,000
Less: Fixed expenses	400,000
Before-tax profits	$400,000

The company had no beginning or ending inventories. Thecompanyproducedandsold10,000unitsin December 2023.

Required:

1. Assuming no change in either the cost structure or the average selling price, prepare a contribution format income statement for January, 2024 assuming production and sales of 7,500 units forStarfish Corporation.

Question 4.3 (Total: 33 marks)

Diamond Company's total overhead costs at various levels of activity are presented below:

	Machine hours	Total overhead costs
March	60,000	$216,800
April	50,000	194,000
May	70,000	239,600
June	80,000	262,400

Assume that the overhead costs above consist of utilities, supervisory salaries, and maintenance. At the 50,000-machine-hour level of activity, these costs are presented below:

Utilities (V)	$54,000
Supervisory salaries (F)	62,000
Maintenance (M)	78,000
Total overhead costs	$194,000

V = Variable, F = Fixed, M = Mixed The company wants to break down the maintenance cost into its basic variable and fixed cost elements.

Required:

1. Estimate the maintenance cost for June.
2. Use the high-low method to estimate the cost formula for maintenance cost.
3. Estimate the total overhead cost at an activity level of 55,000 machine hours, using the separate estimates you obtained for its components.

Question 4.4 (Total: 39 marks)

The following is Silver Corporation's contribution format income statement for last month:

Sales	$1,400,000
Less: variable expenses	800,000
Contribution margin	600,000
Less: fixed expenses	400,000
Operating income	$200,000

The company has no beginning or ending inventories and produced and sold 20,000 units during the month.

Required:

1. What is the company's contribution margin ratio?
2. What is the company's break-even in units?
3. If sales increase by 100 units, by how much should operating income increase?
4. How many units would the company have to sell to attain target operating income of $225,000?
5. What is the company's margin of safety in dollars?
6. What is the company's degree of operating leverage?