TB MC Qu. 5-50 The Missou Manufacturing Company recorded overhead... The Missou Manufacturing Company recorded overhead costs of $14,262 at an activity level of 4,600 machine hours and $8,157 at 2,380 machine hours. The records also indicated that overhead of $9,770 was incurred at 2,680 machine hours. What is the total estimated cost for 2,680 machine hours using the high-low method to estimate the cost equation? O $8,157. $9,770. $8,982. O O $7,370. References Multiple Choice Difficulty: 2 Medium Integrative Case 5-64 Cost Estimation, CVP Analysis, and Decision Making (LO 5-4, 5, 8) Luke Corporation produces a variety of products, each within their own di slon. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $6.25 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product ine income statement for the past 12 months follows: $ 14,712, 150 Costs Manufacturing costs $ 14,400.395 735 B0B corporate costs @5) Produsere mancin Alowance for tax (20% Produstine profiles) 15.100.000 (472 853) 94,770 279,083) $ Al products al Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percentrale is computed based on the most recent year's corporate cus! as a percentage of revenue. Dale on corporale costs and revenues for the past two years follow Moelwile Corporate Revenue S 120.750,000 S TA 200 000 Corporate Overhead Costs $ 8,997 500 5,342 225 Roy O. Andre, the product manager for Bubbs. Is concerned about whether the product wil be dropped by the company and has employed you as a financial consultant to hep with some analyals. In addition to the information given above, Mr. Ancre provides you with the following data on pracuct costs for Bubbs: 227,200 224.900 248.000 Production Coels $1,171,840 1.193,340 1201,963 1217,535 1210.899 1 240 685 2570 248.000 1.259,75 1257 238 1 299,337 1273,772 1374.463 269,200 Required: a. Bunk Stores has requested a quote for a special order of Bubos. This order would nat be subject to any corporate allocation (and would not affect carporate casts). What is the minimum price Mr. Andre can affer Bunk without reducing profit any further? (Round your answer to 2 decimal places..., 32 21]) Minimum Price per case b. How many cases of Bubbs does Luke have to sell in order to break even on the product? (Round variable cost percentage to 2 decimal places, fixed costs to whole dollar amount and profit per case to 3 decimal places for intermediate calculations. Round your final answer up to the nearest whole unit.) Number of cases c. Suppose Luke has a requirement that all products have to earn 5 percent of sales (before tax after corporate allocations) or they will be dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? (Round your minimum price per case to 2 decimal places and do not round your other intermediate calculations. Round your final answer up to the nearest whole unit.) Number of cases d. Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped. (Use variable cost percentage to 2 decimal places. Round intermediate calculations and final answers to nearest whole dollar amount.) Profits
