Chapter 18

Question 1

Variable Cost per Unit

Answer 1

Changes in Total Costs at High versus Low Activity Level / High minus Low Activity Level

(Subtract highest and lowest number of Total Costs)
/
(Subtract highest and lowest number of miles driven [or anything similar to that])

Question 2

High Low Method

Answer 2

Step 1:
Changes in cost (subtract highest and lowest number)

High minus low (same thing)

Divide those numbers to get your variable cost

Step 2: Add the highest numbers and than add the lowest numbers

Than to get your maintenance cost (ex) you do 8,000 (the number you got from adding your highest numbers and lowest numbers) + (1.10 [unit per cost] x miles driven [whatever number they provide])

Question 3

Unit Contribution Margin

Answer 3

Unit Selling Price - Unit Variable Costs

Question 4

Contribution Margin Ratio

Answer 4

Unit Contribution Margin / Unit Selling Price

Question 5

CVP Income Statement

Answer 5

Sales (units sold x unit selling price)

Variable costs ( units sold x unit variable costs)

Contribution margin (sales - Variable costs)

Fixed costs (total monthly fixed costs)

Net income (contribution margin - fixed costs)

Question 6

Break even points in units

Answer 6

Fixed costs / unit contribution margin

Question 7

Break even points in dollars

Answer 7

Fixed costs / contribution margin ratio