# CVP Analysis and High low method

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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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 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.