Cost Estimation & CVPIt is budget season and Margo, Inc is planning for next year and requires abreakdown of the factory overhead cost into the fixed and variableelements. The following data on the OH cost and machine hours areavailable for the past six months:OH Cost Machine Hours$ 23,910$ 23,397$24,153$23,964$ 23,732$ 23,559$ 142,715MonthJanuaryFebruaryMarchAprilMayJuneTotal1,8001,2302,0701,8601,6021,4109,972Required:1. Assume that Mago uses the high-low method of analysis, determine thevariable OH cost per machine hour and monthly fixed costAdditional Sales & Cost information for Margo'sSales PriceMachine Hours Per unitDirect Labor Hours Per UnitDirect labor cost per unitDirect Material cost per unit2$75.3022.52$$40.0018.502. How many units do they need to sell to breakeven in one month3. How many units do they need to sell to earn a pre-tax profit of $52,410 in one month4. Create a contribution margin income statement for the pre-tax profit of $52,410

Point at which total cost of production is equal to revenue for a product. At this point there is…

Cost Estimation & CVP It is budget season and Margo, Inc is planning for next year and requires a breakdown of the factory overhead cost into the fixed and variable elements. The following data on the OH cost and machine hours are available for the past six months:

Cost Estimation & CVP It is budget season and Margo, Inc is planning for next year and requires a breakdown of the factory overhead cost into the fixed and variable elements. The following data on the OH cost and machine hours are available for the past six months:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Cost Estimation & CVP
It is budget season and Margo, Inc is planning for next year and requires a
breakdown of the factory overhead cost into the fixed and variable
elements. The following data on the OH cost and machine hours are
available for the past six months:
OH Cost Machine Hours
$ 23,910
$ 23,397
$24,153
$23,964
$ 23,732
$ 23,559
$ 142,715
Month
January
February
March
April
May
June
Total
1,800
1,230
2,070
1,860
1,602
1,410
9,972
Required:
1. Assume that Mago uses the high-low method of analysis, determine the
variable OH cost per machine hour and monthly fixed cost
Additional Sales & Cost information for Margo's
Sales Price
Machine Hours Per unit
Direct Labor Hours Per Unit
Direct labor cost per unit
Direct Material cost per unit
2$
75.30
2
2.5
2$
$
40.00
18.50
2. How many units do they need to sell to breakeven in one month
3. How many units do they need to sell to earn a pre-tax profit of $52,410 in one month
4. Create a contribution margin income statement for the pre-tax profit of $52,410

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