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1 Carr Company provides human resource consulting services to small and medium-sized companies. Last year, Carr provided services to 700 clients. Total fixed costs were $159,000 with total variable costs of $87,500. Based on this information, complete this chart: (10 points) Solution 500 clients 800 clients 900 clients Total costs Fixed costs Variable costs Total costs Cost per client Fixed cost Variable cost Total cost per client $ 159,000 62.500 22500 $159.000 100000 254.000 $159.000 12.500 211,500 111 312_ 199 $ 443 125 1 324 125 $302 2) Marchete Company produces a single product. They have recently received the results of a market survey that indicates that they can increase the retail price of their product by 8% without losing customers or market share. All other costs will remain unchanged. Their most recent CVP analysis is shown. If they enact the 8% price increase, what will be their new break-even point in units and dollars? (10 points) Current Units sold 950 Sales price per unit $ 125 Variable cost per unit $ 98 Contribution margin per unit Fixed costs $ 23,000 Break-even (in units) Break-even (in dollars) $106,500 Sales $118,750 Variable costs $ 93,100 Contribution margin $ 25,650 Fixed costs $ 23,000 Net Income (loss) $ 2,650 27 852 Solution Next Page Initials:

Answer 1

1	Fixed cost remains same in total for all level of clients
	Variable cost remains same in per client for all level of clients
	Variable cost per client=Total variable cost for 700 clients/700 clients=87500/700=$ 125 per client
						500 clients	800 clients	900 clients
	Total costs:
	Fixed costs					159000	159000	159000
	Variable costs					62500	100000	112500
						(500*125)	(800*125)	(900*125)
	Total costs					221500	259000	271500
	Cost per client:
	Fixed costs					318	199	177
						(159000/500)	(159000/800)	(159000/900)
	Variable costs					125	125	125
	Total cost per client					443	324	302
2						Current	New price
	Units sold				a	950	950
	Sales price per unit				b	125	135
							(125*1.08)
	Variable cost per unit				c	98	98
	Contribution margin per unit				d=b-c	27	37
	Fixed costs				e	23000	23000
	Break-even (in units)				f=e/d	852	622
	Break-even (in dollars)				g=f*b	106500	83970
3
A.	Predetermined overhead rate=Estimated manufacturing overhead/Budgeted direct labor hours=840000/90615=$ 9.27 per labor hour
B.	Predetermined overhead rate=Estimated manufacturing overhead/Budgeted direct labor expense=840000/750000=$ 1.12 per labor expense
C.	Predetermined overhead rate=Estimated manufacturing overhead/Estimated machine hours=840000/150000=$ 5.6 per machine hour
4		Job 1				Hours	Total cost
	Direct materials						350
	Direct labor					16	400
							(16*25)
	Manufacturing overhead					16	352
							(16*22)
	Total cost						1102
		Job 2				Hours	Total cost
	Direct materials				(780-350)		430
	Direct labor					39	975
							(39*25)
	Manufacturing overhead					39	858
							(39*22)
	Total cost						2263