Question 2

Using a detailed graph determine the breakeven point, assuming a product's selling price is $100, fixed costs are $8,000, unit variable costs are $20, and operating income is $32,000 (4 marks)

What is the margin of safety assuming that sales of 140 units. (2 marks)

How many units would have to be sold to yield a target operating income of $22,000, assuming variable costs are $15 per unit, total fixed costs are $2,000, and the unit selling price is $20 (4 marks)

Business Process Professionals provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Account inquiry hours $400,000 10,000 hours

Account billing lines $280,000 4,000,000 lines

Account verification accounts $150,000 40,000 accounts

Correspondence letters $ 50,000 4,000 letters

Total costs $880,000

The above activities are used by it Recording and Investigations Departments as follows:

Recording Investigations

Account inquiry hours 2,000 hours 4,000 hours

Account billing lines 400,000 lines 200,000 lines

Account verification accounts 10,000 accounts 8,000 accounts

Correspondence letters 1,000 letters 1,600 letters

How much of the account inquiry cost will be assigned to Recording? (3 marks)

How much of the account billing cost will be assigned to Investigations? (3 marks)

How much of the total costs will be assigned to Recording? (4 marks)