P$10-9$ Contribution margin and break$-$even analysis

Grand Canyon Manufacturing tinc. produces and sells a product with a price of $\backslash (\backslash$$ $100\backslash )$ per unit. The following cost data have been prepared for its estimated upper and lower limits of activity:

Required:

$1.$ Classify each cost element as either variable, fixed, or semivariable. $($Hint: Recall that variable expenses must go up in direct proportion to changes in the volume of activity.$)$

$2.$ Calculate the break$-$even point in units and dollars. $($Hint: First use the high$-$low method illustrated in Chapter $4$ to separate costs into their fixed and variable components.$)$

$3.$ Prepare a break$-$even chart.

$4.$ Prepare a contribution income statement, similar in format to the statement appearing on page $540,$ assuming sales of $5,000$ units.

$5.$ Recompute the break$-$even point in units, assuming that variable costs increase by $\backslash (20\backslash \%\backslash )$ and fixed costs are reduced by $\backslash (\backslash$$ $50,000\backslash ).$