Hsm260 Week 1
HSM/260: Fixed Costs, Variable Costs, and Break
Fixed Costs, Variable Costs, and Break
Exercise 10.1
During the sixth month of the fiscal year, the program director of the Westchester Home-Delivered Meals (WHDM) program decides to again recompute fixed costs, variable costs, and the BEP using the high–low method. Here are the number of meals served and the total costs of the program for each of the first six months:
Month Meals Served Total Costs July 3,500 $20,500 August 4,000 22,600 September 4,200 23,350 October 4,600 24,500 November 4,700 25,000 December 4,900 26,000
Recompute fixed costs, variable costs, and the BEP. What are the variable costs? What are the fixed costs? How many meals will the WHDM program need to provide during the fiscal year to reach the BEP? How much profit will the program earn if it completes its 45,000-meal contract with the City of Westchester?
Meals: High-Low= 4,900 −3,500 =1,400
Cost: High-Low= $26, 000.00 −$20,500.00 =$5,500.00
The variable cost per meal: $5,500.00 ÷ 1,400 = $3.93
The variable cost for the low month: $13,755.00
Fixed cost: $20,500.00 − ( 3,500 •$3.93 ) = $6,745.00
PX = A + BX
5.77 X = 6,745 +3.93 X
5.77 − 3.93 = 6,745 + (3.93 − 3.93)
1.84 X = 6,745
1.84 X ÷ 1.84 X = 6,745 ÷ 1.84 X
X = 3,666 (Monthly BEP) 3,666 * 12 = 43,992 (Fiscal-year
BEP)
WHDM program profit analysis 45,000 = meal contract
Break Even Point (BEP) = $43,992
1,008 Revenue
1,008 Meals at $5.77= $5,816.16
Total Cost per meal 1,008 at $3.93 =$3,961.44
Total Profit = $5,816.16 − $3961 .44 = $1,854
Fixed Costs, Variable Costs, and Break
Exercise 10.1
During the sixth month of the fiscal year, the program director of the Westchester Home-Delivered Meals (WHDM) program decides to again recompute fixed costs, variable costs, and the BEP using the high–low method. Here are the number of meals served and the total costs of the program for each of the first six months:
Month Meals Served Total Costs July 3,500 $20,500 August 4,000 22,600 September 4,200 23,350 October 4,600 24,500 November 4,700 25,000 December 4,900 26,000
Recompute fixed costs, variable costs, and the BEP. What are the variable costs? What are the fixed costs? How many meals will the WHDM program need to provide during the fiscal year to reach the BEP? How much profit will the program earn if it completes its 45,000-meal contract with the City of Westchester?
Meals: High-Low= 4,900 −3,500 =1,400
Cost: High-Low= $26, 000.00 −$20,500.00 =$5,500.00
The variable cost per meal: $5,500.00 ÷ 1,400 = $3.93
The variable cost for the low month: $13,755.00
Fixed cost: $20,500.00 − ( 3,500 •$3.93 ) = $6,745.00
PX = A + BX
5.77 X = 6,745 +3.93 X
5.77 − 3.93 = 6,745 + (3.93 − 3.93)
1.84 X = 6,745
1.84 X ÷ 1.84 X = 6,745 ÷ 1.84 X
X = 3,666 (Monthly BEP) 3,666 * 12 = 43,992 (Fiscal-year
BEP)
WHDM program profit analysis 45,000 = meal contract
Break Even Point (BEP) = $43,992
1,008 Revenue
1,008 Meals at $5.77= $5,816.16
Total Cost per meal 1,008 at $3.93 =$3,961.44
Total Profit = $5,816.16 − $3961 .44 = $1,854