Problem 1.Identifying cost behaviorAt the various activity levels shown, Jensen Company incurred the following costs.Units Sold 20 40 6080 100 Type of costa. Total Rent Cost3,200 3,200 3,200 3,200 3,200b. Cost per unit of merchandise sold 90 90 90 90 90c. Total Cost of Shopping bags 2 4 6 8 10d. Total Insurance Cost 480 480 480 480 480e. Total salary cost 1,200 1,600 2,000 2,400 2,800f. Total cost of goods sold 1,800 3,600 5,400 7,200 9,000g. Depreciation cost per unit 240 120 80 60 48RequiredIdentify each of these costs as fixed or variable.Problem 2. Art on You, Inc. has agreed to pay a well-known artist a$20,000 commission for the right to exhibit his work for one month. Determine the total commission cost and the commission cost per person if2,000, 3,000, or 5,000 people attend the exhibition. Is the commission cost fixed or variable?Number of People Attending2,0003,0005,000Total Commission CostAverage Commission Cost Per PersonType of cost:Problem 3.Determining fixed cost per unitKenel Corporation incurs the following annual fixed costs.Item CostDepreciation $60,000Officers’ salaries $135,000Long-term lease $58,000Property taxes $11,000RequiredDetermine the total fixed cost per unit of production, assuming that Henke produces 5,000, 5,500, or 6,000 units.Number of units produced5,000 5,500 6,000Total fixed costFixed Cost per unitProblem 4.Determining total variable costThe following variable production costs apply to goods made by Jefferson ManufacturingItem CostMaterials $6.00Labor $3.00Variable Overhead $0.75Total $9.75RequiredDetermine the total variable production cost, assuming that Jefferson makes 7,000, 18,000, or 30,000 units.Number or units produced 7,000 18,00030,000Total variable costVariable cost per unitProblem 5.Break-even pointMendez Corporation sells products for $35 each that have variable costs of $15 per unit. Connor’s annual fixed cost is $270,000.RequiredDetermine the break-even point inunits anddollars.Break-even point in units=Break-even point in dollars ($) =Confirm your response using the model:Income Statement X Units Revenues ($____ x_____) $_______ $_35___ Variable Cost ($____ x ______) (_______) __15___ Contribution Margin $________ $_20__ Fixed Cost (_______) Net Income $________Problem 6.Desired profitNagel Company incurs annual fixed costs of $85,000. Variable costs for Nagel’s product are $25 per unit, and the sales price is $40.00 per unit. Nagel desires to earn an annual profit of$39,000.RequiredDetermine the sales volume in dollars and units required to earn the desired profit.Desired Profit=(Round)Confirm your response using the model:Income Statement X Units Revenues ($____ x_____) $_______ $____ Variable Cost ($____ x ______) (_______) _____ Contribution Margin $________ $____ Fixed Cost (_______) Net Income $________ Note: By confirming your answer, you can have a $5 to $10 difference.
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