Need help with my case study for my managerial accouting class, any help will be greatly appreciated.

Part 1 15 points

Cingle Company LLC produces gadgets at one manufacturing factory. Corporate headquarters are located at the same site. Historical cost information shows the average costs at the following production levels .

Production in units	3,000	3,750	4,500
Cost of goods manufactured
Direct Materials	$ 198,000	$ 247,500	$297,000
Direct Labor	126,000	157,500	189,000
Overhead
Building depreciation-factory	5,000	5,000	5,000
Equipment lease	4,500	4,500	4,500
Factory supplies	1,600	1,930	2,260
Indirect Labor	5,500	5,500	5,500
Quality Inspection Costs	13,360	14,200	15,040
Selling and Administrative Expenses
Shipping	45,500	51,875	58,250
Advertising expense	50,000	50,000	50,000
Salaries and commissions	137,000	155,000	173,000
Insurance expense	10,000	10,000	10,000
Total	$ 596,460	$ 703,005	$ 809,550

A. Identify each of the companys costs as being variable, fixed or mixed with respect to the number of units produced. Explain why you chose that cost behavior. [Hint: What happens to total cost if the cost behavior is fixed, is variable, is mixed? What happens to cost / unit if cost behavior is fixed, is variable, is mixed?] Show all computations needed to determine cost behavior.

NOTE: If the cost is mixed, please use the chart in part B to detail your explanation.

Use the chart below:

Cost	Fixed	Variable	Mixed	Explanation
Direct Materials		X		The total cost increases but cost/unit ($66) remains constant.
Direct Labor
Building depreciation-factory
Equipment lease
Factory supplies
Indirect Labor
Quality Inspection Costs
Shipping
Advertising expense
Salaries and commissions
Insurance expense

B. Using the high-low method, separate each mixed cost into variable and fixed elements. State the cost formula for each mixed cost. Show all your work and computations.

Use the chart below:

Mixed Cost (Name)	Cost Formula (Y = a + bx form)	Supporting Computations

C. Determine the expected total costs (identify each cost separately) at a production level of 5,000 widgets. Show computations. You should arrive at a total cost figure.

Use the chart below:

	Cost	Supporting Computations
Direct Materials
Direct Labor
Building dep-factory portion
Equipment lease
Factory supplies
Indirect Labor
Quality Inspection Costs
Shipping
Advertising expense
Salaries and commissions
Insurance expense
TOTAL COST

D. State the cost equation for the total costs of the entire company in the form Y = a + bx. Using alternative one or alternative two below, show how you determined the cost equation. (Note: you should have one equation such that someone could determine expected total cost for any activity level within the relevant range.)

Company Wide Cost equation:

Use the chart below (Alternative one) which shows the fixed cost portion and the variable rate for each cost item or use the high- low method (Alternative two) for determining the cost equation. You need to choose only one alternative.

Alternative one: (use the information and chart from part A and the information from part B. Input the $ amounts in appropriate columns and total the columns of the chart. Using the chart information, state the cost equation in the Y = a + bx form.)

	Fixed Cost	Variable Rate ($/unit)
Direct Materials
Direct Labor
Building dep-factory portion
Equipment lease
Factory supplies
Indirect Labor
Quality Inspection Costs
Shipping
Advertising expense
Salaries and commissions
Insurance expense
TOTAL COST

Alternative two: High-low method and supporting, labeled computations.

Part Two 20 points

Goggle Company manufactures a special virtual reality goggle that can be used underwater. The companys contribution format income statement for last year is below:

	Total	Per Unit	% of Sales
Sales (10,000 units)	$750,000	$75	100%
Variable Expenses	450,000	45	?
Contribution Margin	300,000	$30	?
Fixed Expenses	170,000
Net Operating Income	$130,000

Goggle Company is ready to take off and expand its market share. Management has asked for several items to be analyzed in order to make good decisions.

Calculate the companys contribution margin ratio and the variable expense ratio.

Compute the companys break-even point in both units and in sales dollars. You may use either the equation method or the formula method.

Management is predicting a 20% increase in sales next year, staying within the relevant range for the company. How much will the companys net operating income increase?

Refer to the original data. Assume that management would like to earn a profit of at least $55,000. How many units will have to be sold to meet this target profit?

Refer to the original data. Compute the company's margin of safety in both dollar and percentage form.

Compute the company's degree of operating leverage at the present level of sales.

Assume that through a more intense effort by the sales staff, the company's sales increase by 8% next year. By what percentage would you expect net operating income to increase? Use the degree of operating leverage to obtain your answer.

Verify your answer to (b) by preparing a new contribution format income statement showing an 8% increase in sales.

In an effort to increase sales and profits, management is considering the use of a higher quality virtual reality system than the current system. The new system would increase variable costs by $15 per unit, but management could eliminate one quality inspector who is paid a salary of $30,000 per year. Management believes they can increase the selling price by $30 per unit.

Assuming that changes are made as described above, prepare a projected contribution format income statement for next year. Show data on a total, per unit, and percentage basis.

Compute the company's new break-even point in both units and dollars of sales. Use the formula method.

Would you recommend that the changes be made? Why or why not?