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CVP Analysis and High low method

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Problems:

Given the following cost and activity observations for Sanchez Company's utilities, use the high-low method to calculate Sanchez's variable utilities costs per machine hour.
Cost Machine Hours
May $8,300 15,000
June 10,400 20,000
July 7,200 12,000
August 9,500 18,000

$10.00
$.60
$.40
$.52

24. If fixed costs are $500,000 and the unit contribution margin is $40, what is the break-even point if fixed costs are increased by $80,000?
14,500
12,500
8,333
9,667

25. If fixed costs are $490,000, the unit selling price is $35, and the unit variable costs are $20, what is the break-even sales (units) if fixed costs are reduced by $40,000?
32,667 units
14,000 units
30,000 units
24,500 units

26. If fixed costs are $39,600, the unit selling price is $42, and the variable costs are $24, what is the break-even sales (unit) if the variable costs are decreased by $2?
1,650
990
1,980
1,350

27. Assume that Crowley Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $20 and $45 respectively. Crowley has fixed costs of $350,000. The break-even point in units is _______.
14,000 units
25,278 units
8,000 units
10,769 units

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Solution Summary

There are several problems related to high low method and CVP analysis. Solutions explain steps to study the effect of change in variable costs/fixed costs on break even point.

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Solutions:

Given the following cost and activity observations for Sanchez Company's utilities, use the high-low method to calculate Sanchez's variable utilities costs per machine hour.
Costs Machine Hours
May $8,300 15,000
June 10,400 20,000
July 7,200 12,000
August 9,500 ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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