Supplemental Problem #1
Walters, LLC produces knock-off watches. Each watch sells for $40.00. Walters produced and sold 100 watches last year.
Use the following cost data to compute the variable cost per unit and the fixed cost for the period.
Volume Cost
10 $ 800.00
20 $1,100.00
15 $ 900.00
12 $ 900.00
18 $1,050.00
25 $1,250.00
1. Using the high-low method, determine the amount of variable cost per unit.
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2. Using the high-low method, determine the total amount of fixed costs.
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3. What is the variable cost ratio?
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4. 4. What is the contribution margin per unit?
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5. 5. What is the contribution margin ratio?
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6. 6. How many watches must Walters sell to break even?
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7. 7. What is the break-even sales revenue?
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3. 8. What was Walters' operating income last year?
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9. What was Walters' margin of safety?
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. 10. Assume the company has a desired net income of $1,500. (1) How many sales dollars must the company earn? (2)
How many watches must the company sell?
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7