Chapter 12, Problem 12.18P

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

High-Low Method:

This method is used to determine the fixed as well as variable part of the mixed cost. The formula for calculation of variable cost per unit is as follows:

  $\begin{array}{l}\hfill \\ \text{Variable cost per unit = }\frac{\left(\text{High Cost - Low Cost}\right)}{\left(\text{High units - low units}\right)}\hfill \end{array}$

The formula to calculate the Fixed Cost is as follows:

  $\text{Fixed Cost = Total cost - (Units}\times \text{Variable cost per unit)}$

Requirement-a:

To Calculate:

The missing amounts

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

High-Low Method:

This method is used to determine the fixed as well as variable part of the mixed cost. The formula for calculation of variable cost per unit is as follows:

  $\begin{array}{l}\hfill \\ \text{Variable cost per unit = }\frac{\left(\text{High Cost - Low Cost}\right)}{\left(\text{High units - low units}\right)}\hfill \end{array}$

The formula to calculate the Fixed Cost is as follows:

  $\text{Fixed Cost = Total cost - (Units}\times \text{Variable cost per unit)}$

Requirement-b:

To Calculate:

The Formula for mixed cost using the high low method

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

High-Low Method:

This method is used to determine the fixed as well as variable part of the mixed cost. The formula for calculation of variable cost per unit is as follows:

  $\begin{array}{l}\hfill \\ \text{Variable cost per unit = }\frac{\left(\text{High Cost - Low Cost}\right)}{\left(\text{High units - low units}\right)}\hfill \end{array}$

The formula to calculate the Fixed Cost is as follows:

  $\text{Fixed Cost = Total cost - (Units}\times \text{Variable cost per unit)}$

Requirement-c:

To Calculate:

The total cost for the production of 20,000 Units

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis: The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

High-Low Method:

This method is used to determine the fixed as well as variable part of the mixed cost. The formula for calculation of variable cost per unit is as follows:

  $\begin{array}{l}\hfill \\ \text{Variable cost per unit = }\frac{\left(\text{High Cost - Low Cost}\right)}{\left(\text{High units - low units}\right)}\hfill \end{array}$

The formula to calculate the Fixed Cost is as follows:

  $\text{Fixed Cost = Total cost - (Units}\times \text{Variable cost per unit)}$

Requirement-d:

To identify:

Two cost assumption made in the calculation of mixed costs