Reference no: EM133021551
Question - Farah Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product which it sells at $132.7 per unit.
Production volume 12,500 units 14,000 units
Direct materials $713,750 $799,400
Direct labor $256,250 $287,000
Manufacturing overhead (Mixed) $1,004,700 $1,027,350
Fixed selling and administrative expenses $384,050 $384,050
Required - Using high-low method and CVP analysis
1. Compute Farah's breakeven point in units and dollars.
2. Compute how many units the company needs to sell to earn a profit of $600,000.
3. Compute the selling price per unit of the company if BEP (units) is 40,000 units and the variable cost per unit and total fixed cost does not change.
4. Explain the various methods used to estimate the variable component and the fixed component of the mixed cost (Excluding Scattergraph method) and state which method is the most accurate? Why?
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