Reference no: EM132596585

Cost Estimation & CVP

Prudence, Inc is preparing a flexible budget for next year and requires a breakdown of the factory overhead cost into the fixed and variable elements. The following data on the OH cost and direct labor hours worked are available for the first six months of this year:

Month OH             Cost Direct          Labor Hours

January                $ 14,700                 3,000

February                $ 11,435                2,050

March                  $ 16,335                 3,450

April                     $ 14,990                   3,100

May                       $ 13,560                   2,670

June                     $ 12,675                   2,350

Total                     $ 83,695                  16,620

Question 1: Assume that Prudence uses the high-low method of analysis, determine the variable OH cost per direct labor hour and monthly fixed cost

Additional Sales & Cost information for Prudence's

Sales Price $ 25.35

Direct Labor hours per unit 0.50

Direct labor cost per hour $ 20.00

Direct Material cost per unit $ 6.50

Question 2: How many units do they need to sell to breakeven

Question 3: How many units do they need to sell to earn a pre-tax profit of $35,074 in one month

Question 4: Create a contribution margin income statement for the pre-tax profit of $35,074