Part 1 In Class Assignment (Fixed versus Variable Costs) Identify whether the following are fixed costs or variable costs for Hostess potato chips - in class exercise (8 Marks) Item Type of cost (For V) 1.Package design 2. Office rent 3. Administrative salaries and benefits 4.Plant electricity 5. Salesmen commission 6.TV media 7. Hourly labour for factory line workers 8. Packaging materials 1. Costs and profit vary with output a) Total fixed costs are $200,000 and total variable costs are $100,000 at the output of 20,000 units. What are the probable total fixed costs and total variable costs at output of 10,000 units? What are the total costs at each volume level? (8 Marks) Output Units Total Costs Variable costs/units Total Variable Costs Total Fixed Costs Total Cost Per Unit 10,000 20,000 $100,000 $200,000 b) If the items sell for $38 per unit what is the revenue and profit if 20,000 units are sold, if 10,000 units are sold? (6 Marks) Output Units Revenue Profit Total costs (take from above) 10,000 20,000 2. Breakeven Calculation A producer has labour costs of $1.50 per unit, material costs of $.45 per unit, and shipping costs of $.05 per unit. Advertising costs are $500,000. Salaries are $360,000. Overhead is $400,000. If the unit selling price is 2.50, what is the Break-even in units? (3.5 Marks) 3. Target Contribution Breakeven The WeRNuts manufacturing company sells their "Model B" for $5.00 per unit. Their variable cost per unit is $4.25. The fixed costs total $750,000. If WeRNuts plans to increase advertising by $80,000 and also plans a profit goal of $70,000, how many units must be produced and sold to achieve these goals? (3.5 Marks) 6. International Conventions overhead costs to produce the 3 day Marketing Conference is $90,000 and their advertising costs are $50,000. They estimate that the variable costs for each attendee including meals and materials are $350. They are charging a registration price per attendee of $1,500. (3 Marks) i) What are the break even number of attendees? 1) If the target return is $50,000, what are the contribution target break even numbers of attendees? k) If the international Conventions raised their prices per attendee to $2000 what would their new break even attendance be? 7. Zinc Energy Co has launched a new battery that uses new zinc- air technology. The unit costs for the batter are: battery housing of $8, materials $6 and direct labour $6 per unit Retooling of the factory will add a one time additional fixed cost of $ 1 million in equipmnmet. Annual fixed costs include sales, marketing and advertising expenses of $1 million, general and admin expenses of $ 1 million and other fixed costs totaling $2 million. (3 Marks) a. What is the total variable cost associated with the new battery? b. What are the total fixed costs of the new battery? c. If the price is set at $35 for the new battery what would the break even point be in units? In $ sales? 8. Prepare an Income Statement - label each line of the Income statement including the numbers you calculate (6 Marks) Sell 2000 units SP = $80 per unit Cost of Goods = $60 per unit Fixed Administrative costs = $ 20,000 Marketing Expenses= $5000 $ Sales Profit