Variable Costs

B | Operate the cruise ship in a new area where there are no pirates. | 20% | $0.6M | $0.8M | $1.1M | $1.6M | $1.9M | $6.0M |

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

2.) What is the ‘relevant range’ for the cost structure? In other words, at what volume might you expect the fixed and variable costs to change appreciably?

10. If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production?

One of the major benefits of expansion is the reduction of fixed cost (fixed and selling). The cost is absorbed by 85,000 units instead of 80,000 units resulting in saving of $0.42 per unit.

a) In the first set of calculations, the staff used a discount rate of 20%, a five-year time horizon, and ignored taxes and terminal value. What is the relative attractiveness of these three alternatives?

13. Sunglass Hut purchases a pair of Tiffany sunglasses from a wholesaler for $180 and sells it for $300. If the wholesaler increases its price by 20%, to the nearest dollar, what should Sunglass Hut charge in order to maintain the same percent margin?

Unit Break-even Volume = Total Fixed Costs/Contribution per unit = $525,000 - $6.40 = 82,031.25units

To estimate variable costs, Tables F and I are needed. Table F shows the cost of goods sold averages 77.1% of sales (variable cost); Table I shows an average wholesale price for the seven competing brands of about $3.16 per six pack (about one gallon).

The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:

"a. If each project's cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what

b. Use your answer to part A to determine the total annual indirect cost assigned to:

The $320,000, on the other hand, is a fixed cost associated with the proposed addition.

3) Using the budget Data, what was the total expected cost per unit if all manufacturing and shipping overhead (both variable and fixed) were allocate to planned production? What was the actual cost per unit of production and shipping?

* Direct costs are those costs that are necessary to convert raw materials into the whiskey that goes into the aging barrels.