Question: Problem 4.3 ( LO1,2 ) High-Low, Break-Even Lancer Audio produces a high-end AV receiver that sells for $1,300. Total operating expenses for the past 12
Problem 4.3 ( LO1,2 ) High-Low, Break-Even Lancer Audio produces a high-end AV receiver that sells for $1,300. Total operating expenses for the past 12 months are as follows:
Units Produced and Sold Cost
August 165 $140,345
September 130 116,990
October 150 130,650
November 145 127,670
December 155 133,790
January 170 143,910
February 140 123,520
March 150 130,950
April 145 127,385
May 150 129,865
June 140 122,720
July 135 120,255
Required
1. Use the high-low method to estimate fixed and variable costs.
2. Based on these estimates, calculate the break-even level of sales in units. (Round to the nearest whole unit.)
3. Calculate the margin of safety for the coming August assuming estimated sales of 175 units.
4. Estimate total profit assuming production and sales of 175 units.
5. Comment on the limitations of the high-low method in estimating costs for Lancer Audio.
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