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Grand Canyon Manufacturing Inc. produces and sells a product with a price of $100 per unit. The following cost data have been prepared for its estimated upper and lower limits of activity: Lower Limit Upper Limit Production (units) 4,000 6,000 Production costs: $ 60,000 $ 90,000 Direct materials Direct labor... 80,000 120,000 Overhead: Indirect materials 25,000 37,500 Indirect labor..... 40,000 50,000 20,000 ..... Selling and administrative expenses: Depreciation . 20,000 Sales salaries .. 50,000 65,000 Office salaries. 30,000 30,000 Advertising.. 45,000 45,000 Other ... 15,000 20,000 Total... $365,000 $477,500 ..... REQUIRED: 2. Calculate the break-even point in units and dollars. (Hint: First use the high-low method illustrated in Chapter 4 to separate costs into their fixed and variable components.)

Grand Canyon Manufacturing Inc. produces and sells a product with a price of $100 per unit. The following cost data have been prepared for its estimated upper and lower limits of activity: Lower Limit Upper Limit Production (units) 4,000 6,000 Production costs: $ 60,000 $ 90,000 Direct materials Direct labor... 80,000 120,000 Overhead: Indirect materials 25,000 37,500 Indirect labor..... 40,000 50,000 20,000 ..... Selling and administrative expenses: Depreciation . 20,000 Sales salaries .. 50,000 65,000 Office salaries. 30,000 30,000 Advertising.. 45,000 45,000 Other ... 15,000 20,000 Total... $365,000 $477,500 ..... REQUIRED: 2. Calculate the break-even point in units and dollars. (Hint: First use the high-low method illustrated in Chapter 4 to separate costs into their fixed and variable components.)

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter13: Emerging Topics In Managerial Accounting
Section: Chapter Questions
Problem 32BEB: During the week of August 21, Parley Manufacturing produced and shipped 4,000 units of its machine...
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Grand Canyon Manufacturing Inc. produces and sells a product with a price of $100 per unit. The following cost data have been prepared for its estimated upper and lower limits of activity: Lower Limit Upper Limit Production (units) 4.000 6,000 Production costs: Direct materials $ 60,000 $ 90,000 Direct labor. 80,000 120,000 Overhead: Indirect materials 25,000 37,500 Indirect labor 40,000 50,000 Depreciation 20,000 20,000 Selling and administrative expenses: Sales salaries 50,000 65,000 Office salaries 30,000 30,000 Advertising. 45,000 45,000 Other 15,000 20,000 Total $365,000 $477,500 REQUIRED: 2. Calculate the break-even point in units and dollars. (Hint: First use the high-low method illustrated in Chapter 4 to separate costs into their fixed and variable components.) 3. Prepare a break-even chart.
Transcribed Image Text:Grand Canyon Manufacturing Inc. produces and sells a product with a price of $100 per unit. The following cost data have been prepared for its estimated upper and lower limits of activity: Lower Limit Upper Limit Production (units) 4.000 6,000 Production costs: Direct materials $ 60,000 $ 90,000 Direct labor. 80,000 120,000 Overhead: Indirect materials 25,000 37,500 Indirect labor 40,000 50,000 Depreciation 20,000 20,000 Selling and administrative expenses: Sales salaries 50,000 65,000 Office salaries 30,000 30,000 Advertising. 45,000 45,000 Other 15,000 20,000 Total $365,000 $477,500 REQUIRED: 2. Calculate the break-even point in units and dollars. (Hint: First use the high-low method illustrated in Chapter 4 to separate costs into their fixed and variable components.) 3. Prepare a break-even chart.
2. Break-even sales volume (units) a. Total costs at upper production limit b. Total costs at lower production limit c. Change in total costs d. Total units at upper production limit e. Total units at lower production limit f. Change in total units g. Variable cost per unit (c + f) 56.25 h. Units produced with lower production limit i. Variable costs (c x d) j. Fixed costs (b – i) k. Selling price per unit - Variable cost per unit I. Break-even sales volume in units (j + k) 43.75 3,200 Break-even sales volume (dollars) a. Total fixed costs b. 1- (Variable cost per unit + Sales price per unit) c. Break-even sales volume in dollars (a + b) 140,000 $ 320,000 3. For each unit level of sales, enter the total sales dollars and total costs. The chart at right will be plotted as you enter the amounts. After all points are plotted, grab and move the labels provided at the left to identify each area. Units Sales $ Costs $ 1,000 E 2,000 3,000 4,000 5,000 6,000 7,000
Transcribed Image Text:2. Break-even sales volume (units) a. Total costs at upper production limit b. Total costs at lower production limit c. Change in total costs d. Total units at upper production limit e. Total units at lower production limit f. Change in total units g. Variable cost per unit (c + f) 56.25 h. Units produced with lower production limit i. Variable costs (c x d) j. Fixed costs (b – i) k. Selling price per unit - Variable cost per unit I. Break-even sales volume in units (j + k) 43.75 3,200 Break-even sales volume (dollars) a. Total fixed costs b. 1- (Variable cost per unit + Sales price per unit) c. Break-even sales volume in dollars (a + b) 140,000 $ 320,000 3. For each unit level of sales, enter the total sales dollars and total costs. The chart at right will be plotted as you enter the amounts. After all points are plotted, grab and move the labels provided at the left to identify each area. Units Sales $ Costs $ 1,000 E 2,000 3,000 4,000 5,000 6,000 7,000
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