1. Active Company accumulated the following data for a delivery truck.
Miles Driven Total Cost Miles driven Total Cost
January 10,000 $ 15,000 March 9,000 $ 12,500
February 8,000 $14,500 April 7,500 $13,000
Required:
a) Determine the equation to predict total costs for delivery truck. b) What should total costs be if 12,187 miles were driven?
Cost = 15000 _ 13000 = 2000
Activity 10,000 7000 2500
← In cost = 2000 = 0.8 = VC Per unit 2500
( In Activity = 15000 _ 10000 × 0.8 = 8000=7000 13000 7500 × 0.8 = 6000=7000
b) 12187 × 0.8 = 9749.6 = 7000 16749.6
2. The Law Mower Shop is a retailer that sells lawn mowers. The income statement for the month of June showed a gross margin of $ 60,000 and operating income of $ 20,000. Selling and administrative expenses were 50% fixed. Two hundred mowers were sold at an average price of $ 750 per unit. All mowers are purchased from Toro and John Deere.
Required:
a) Prepare an income statement for the month using the contribution approach. b) What is the contribution margin per unit?
Gross margin – 60,000
Oprt income _ 20,000
S/ADM exp = 50%
Selling price= $ 750 per unit.
a) Unit sold per unit total 200
Sales 750 × 200 = 150,000
Variable expenses
Cost of goods sold 90000 Selling expenses/ together admin 20,000
Fixed cost
Cost S/admin 20000
Total cost = 40,000 admin cost with variable expenses.
b) Y= a + b (×)
Contribution margin = selling price- expenses per unit = 750-650 = 750-650 = 100per unit 90000 20000