SMH company whose total factory overhead costs fluctuate somewhat fromyear to year, according to the number of machine-hours worked in its production facility. These costs at

high and low levels of activity over recent years are given below:

Level of Activity

Low High

Machine-hours . . . . . . . . . . . . . . . . 60,000 85,000

Total factory overhead costs . . $14,250,000 $17,625,000

The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has

analyzed these costs at the 50,000 machine-hours level of activity as follows:

For planning purposes, the company wants to break down the maintenance cost into its variable and

fixed cost elements.

Required: SHOW YOUR WORK

1.6 marks) Estimate how much of the factory overhead cost of $17,625,000 at the high level of activity consists

of maintenance cost.

2.6 marks) Using the high-low method, estimate a cost formula for maintenance.

3.6 marks) What total overhead costs would you expect the company to incur at an operating level of 70,000

machine-hours?

question 2.

Gage Irwin (GI) is a text book publisher. GI sells to bookstores for $60 per book. Each book costs $40 in print costs. The authors make $10 in royalties on each book sold. Advertising and marketing costs are $100,000 per title. Gage Irwin is thinking of creating an e-book for one of its titles. An e-book will have no printing costs but will have an additional fixed cost of $50,000. Comparable e-books sell for $40 each.

Require:SHOW YOUR WORK FOR EACH

b) (10 marks) Calculate the unit contribution margin in dollars that Gage Irwin makes on each printed textbook.

c) (10 marks) Calculate the number of print textbooks Gage Irwin must sell in order to break even.

d) (10 marks) Calculate the number of e-books Gage Irwin must sell in order to break even.

question 3

Sandi sells hotdogs outside of Ryerson University. Each hotdog costs her $1.00 and she sells them for $2.50 each. After buying a hotdog, students can choose to put on ketchup, mustard, relish or other toppings. Sandi estimates that on average students put on about 20 of toppings. Each month Sandi pays $500 to rent the space she sells from. She also pays $1,000 to rent the hotdog truck. The truck runs on propane. Propane also fuels the stove that is used to cook the hotdogs. Sandi has averaged $1,000 per month in propane. She also makes $4,000 per month in profit.

Required: SHOW YOUR WORK

How many hotdogs per month does Sandi sell in order to meet $4,000 profit?