**Oil Change Service Cost Analysis****Data Overview**| Number of Oil Changes | Total Cost ||-----------------------|----------------|| 6,000 | $8,300 || 9,000 | $10,600 || 12,000 | $13,000 || 14,000 | $15,000 |Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each.**Instructions**Please format your answers using $, commas, or % where appropriate.**(a) High-Low Method**Using the high-low method, determine:- Variable costs per unit: [Enter Value]- Fixed costs: [Enter Value]**(b) Break-Even Point Calculation**Determine the break-even point in:- Number of oil changes: [Enter Value]- Sales dollars: [Enter Value]**(c) Margin of Safety**Without regard to your answers in parts (a) and (b), determine the margin of safety if:- Current actual sales are $100,000- Breakeven sales are $80,000Calculate:- Margin of safety in dollars: [Enter Value]- Margin of safety percentage: [Enter Value] Bill Braddock is considering opening a Fast 'n Clean Car Service Center. He estimates the following costs will be incurred during his first year of operations:- Rent: $8,800- Depreciation on equipment: $7,000- Wages: $16,400- Motor oil: $12.00 per oil change- Oil filters: $5.00 per oil change- Franchise fee: $1.20 per oil changeAdditionally, utility costs are expected to behave in relation to the number of oil changes as follows:| Number of Oil Changes | Utility Costs ||-----------------------|---------------|| 4,000 | $7,000 || 6,000 | $8,300 || 9,000 | $10,600 || 12,000 | $13,000 || 14,000 | $15,000 |Bill Braddock anticipates providing the oil change service with a filter at $25 each.**Instructions:**Format answers with $ signs, commas, or % when appropriate.(a) Using the high-low method, determine variable costs per unit and fixed costs for the utility costs.

The costs incurred for production are differentiated as fixed and variable costs. The fixed costs remain constant and variable costs changes with change in level of production. Part a. For utilities costs, Using High Low method, High level units = 14,000 Low level units = 4,000 High level cost = $15,000 Low level cost = $7,000 Variable Cost per unit = (High level cost - low level cost) / (high level units - low level units) = (15,000 - 7,000)/ (14,000 - 4,000) = $0.8 per unit Fixed cost = High level cost - High level units * VC per unit = 15,000 - (14,000 * $0.8) = $3,800 Part b. SP per unit = $25 VC per unit = $12 + 5 + 1.20 + 0.80 = $19 CM per unit = SP - VC = 25 - 19 = $6 CM ratio = CM /SP = 6/25 = 0.24 = 24% Fixed cost = 8,800+7,000+16,400+3,800 = $36,000 Break even sales units = Fixed cost / CM per unit = 36,000 /6 = 6,000 units Brea even sales dollars = Fixed cost / CM ratio = 36,000 / 0.24 = $150,000 Part c. Actual current sales = $100,000 Break even sales = $80,000 Margin of safety sales revenue = Actual sales - Break even sales = 100,000 - 80,000 = $20,000 Margin of safety sales % = Margin of safety sales / Current sales = 20,000 / 100,000 = 0.20 = 20%

Business

Accounting

Instructions 12,000 14,000 (b) Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each. Format answers with $ signs, commas, or % when appropriate. (a) Using the high-low method, determine variable costs per unit for the utility costs. Determine the break-even point in number of oil changes $13,000 $15,000 breakeven sales are $80.000 4 and fixed costs and sales dollars (c) Without regard to your answers in parts (a) and (b), determine the margin of safety in dollars and percentage if current actual sales are $100,000 and

Instructions 12,000 14,000 (b) Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each. Format answers with $ signs, commas, or % when appropriate. (a) Using the high-low method, determine variable costs per unit for the utility costs. Determine the break-even point in number of oil changes $13,000 $15,000 breakeven sales are $80.000 4 and fixed costs and sales dollars (c) Without regard to your answers in parts (a) and (b), determine the margin of safety in dollars and percentage if current actual sales are $100,000 and

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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