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1. The variable and fixed costs for each product line—canoes and paddles—
possess both a manufacturing and a marketing component. However, the
manufacturing and marketing data are recorded separately, which means that
a. Canoe: High-Low (Manufacturing costs):
($140,000 – $108,000)/(400 – 240) = $200 variable cost per unit
Total Fixed Cost = Total Cost – Total Variable Cost
= $140,000 – ($200 variable cost per unit × 400) = $60,000 total fixed cost
b. Paddle: High-Low (Manufacturing costs):
($66,500 – $38,500)/(1,700 – 900) = $35 variable cost per unit
FOR MANY GLACIER HOTEL
COST BEHAVIOR AND COST-VOLUME-PROFIT ANALYSIS
Making the Connection:
INTEGRATIVE EXERCISE (Chapters 1–4)
Making the Connection Integrative Exercise (Chapters 1–4)
2. The operating income equation for determining the breakeven in units is as
follows:
3. The sales mix of canoes to paddles is 300:1,200, which can be reduced to 1:4.
Package
Product Price Unit VC Unit CM Package CM
Canoe……………… $500 $300 $200 1 $200
4. a. All manufacturing costs are product costs. All marketing costs and
customer hotline costs are period costs.
5. The canoe production (or manufacturing) expenses are as follows (see solution
for Requirement 1a):
MTC1-2
Making the Connection Integrative Exercise (Chapter 1–4)
The sales mix of canoes to paddles is unchanged at 300:1,200, which can be
reduced to 1:4. However, the increase in canoe costs reduces the package
contribution margin as follows:
Package
Product Unit VC Unit CM Package CM
Canoe……………
…
$310 $190 1 $190
6. Margin of safety (MOS) is the units sold above the break-even volume.
MOS = Units Sold – BE Total Units Sold
700 canoes sold – 500 canoe units at BE (see solution to Requirement 3)
Price
$500
MTC1-3
