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High-Low, Break-even: Lancer Audio produces a high-end AV receiver that sells for $1300.
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/ $120,225
Units produced and sold 150:
Component costs $71,000 Supplies 2,500
Assembly labor 25,000 Rent 2,300 Supervisor salary 5,600
Electricity 350 Telephone 280 Gas 300 Shipping 2,000
Advertising 2,600 Administrative costs 15,000
TOTAL $126,930
questions:
a) Use the high low method to estimate fixed and variable costs
b) Based on these estimates, calculate the break-even level of sales in units. (round to the nearest whole unit).
c) Calculate the margin of safety for the coming august assuming estimated sales of 175 units
d) Estimate the total profit assuming production and sales of 175 units
e) Comment on the limitation of the high-low method in estimating costs for Lancer audio.
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