Tunis Business School, University of Tunis 2020-2021
Bachelor of Science in Business Administration
Undergraduate Fall Term
Academic year 2020-2021
Managerial Accounting BCOR 225
Groups: 2, 5, 6, 10, & 11
Chapter 6: Cost-Volume-Profit
Course instructors
Faculty (lectures): Prof. Karim Mhedhbi E-mail: [email protected]
Faculty (Tutorials): Prof. Yosr Guirat E-mail: [email protected]
Exercises
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Tunis Business School, University of Tunis 2020-2021
E 5-1 Bonita Company manufactures a single product. Annual production costs incurred in
the manufacturing process are shown below for two levels of production.
Costs Incurred
Production in Units 5,000 10,000
Production Costs Total Cost Cost/Unit Total Cost Cost/Unit
Direct materials $8,000 $1.60 $16,000 $1.60
Direct labor 9,500 1.90 19,000 1.90
Utilities 2,000 0.40 3,300 0.33
Rent 4,000 0.80 4,000 0.40
Maintenance 80 0.16 1,400 0.14
Supervisory salaries 1,000 0.20 1,000 0.10
Instructions:
(a) Define the terms variable costs, fixed costs, and mixed costs.
(b) Classify each cost above as either variable, fixed, or mixed.
E5-3 The controller of Norton Industries has collected the following monthly expense data for
use in analyzing the cost behavior of maintenance costs.
Month Total Maintenance Costs Total Machine Hours
January $2,700 300
February 3,000 350
March 3,600 500
April 4,500 690
May 3,200 400
June 5,500 700
Instructions:
(a) Determine the fixed and variable cost components using the high-low method.
(b) Prepare a graph showing the behavior of maintenance costs, and identify the fixed and
variable cost elements. Use 100-hour increments and $1,000 cost increments.
E5-17 Felde Bucket Co., a manufacturer of rain barrels, had the following data for 2016:
Sales 2,500 units
Sales price $40 per unit
Variable costs $24 per unit
Fixed costs $19,500
Instructions
(a) What is the contribution margin ratio?
(b) What is the break-even point in dollars?
(c) What is the margin of safety in dollars and as a ratio?
(d) If the company wishes to increase its total dollar contribution margin by 30% in 2017, by
how much will it need to increase its sales if all other factors remain constant?
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Tunis Business School, University of Tunis 2020-2021
P5-3A Tanek Corp.’s sales slumped badly in 2017. For the first time in its history, it operated
at a loss. The company’s income statement showed the following results from selling
500,000 units of product: sales $2,500,000, total costs and expenses $2,600,000, and net
loss $100,000. Costs and expenses consisted of the amounts shown below.
Total Variable Fixed
Cost of goods sold $2,140,000 $1,590,000 $550,000
Selling expenses 250,000 92,000 158,000
Administrative expenses 210,000 68,000 142,000
$2,600,000 $1,750,000 $850,000
Management is considering the following independent alternatives for 2018.
1. Increase unit selling price 20% with no change in costs, expenses, and sales volume.
2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to
total salaries of $60,000 plus a 5% commission on sales.
Instructions
(a) Compute the break-even point in dollars for 2017.
(b) Compute the break-even point in dollars under each of the alternative courses of action.
(Round all ratios to nearest full percent.) Which course of action do you recommend?
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