B-202 SOLUTIONS
Solutions to Questions and Problems
NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps.
Due to space and readability constraints, when these intermediate steps are included in this solutions
manual, rounding may appear to have occurred. However, the final answer for each problem is found
without rounding during any step in the problem.
Basic
1. a. The total variable cost per unit is the sum of the two variable costs, so:
b. The total costs include all variable costs and fixed costs. We need to make sure we are including
all variable costs for the number of units produced, so:
c. The cash breakeven, that is the point where cash flow is zero, is:
Q C = $720,000 / ($19.99 – 8.56)
Q C = 62,992.13 units
2. The total costs include all variable costs and fixed costs. We need to make sure we are including all
variable costs for the number of units produced, so:
Total costs = ($24.86 + 14.08)(120,000) + $1,550,000
Total costs = $6,222,800
The marginal cost, or cost of producing one more unit, is the total variable cost per unit, so:
Marginal cost = $24.86 + 14.08
Marginal cost = $38.94