Individual Assignment Chapter 5 & 6

E5-1 (a) Variable Costs Costs that vary in total directly and proportionately with changes in the activity level. (p. 192) Fixed Costs Costs that remain the same in total regardless of changes in the activity level. (p. 192) Mixed Costs Costs that contain both a variable and a fixed cost element and change in total but not proportionately with changes in the activity level. (p. 195) (b) Direct Materials Variable Cost Direct Labor Variable Cost Utilities Mixed Cost Rent Fixed Cost Maintenance Mixed Cost Supervisory Salaries Fixed Cost

E5-9 (a) Contribution Margin Ratio $20,250 60% =$33,750 Break-Even Point in Dollars $20,250 $90 = 225 Units $6,750 I dont think the fares should be messed with. Everything seems to be going ok for the company.

(b) (c)

E6-7 It seems to me that Shynee Minerals should process the products further. Even though they incur joint costs of $180,000 for one batch of the raw material, they could still make a profit off of each of the three joint products, Sarco, Barco, & Larco.

E6-10 Net Income Inc (Dec) ($100,000) 85,000 (185,000) 0 ($185,000)

Sales Variable Costs Contribution Margin Fixed costs Net income (loss)

Continue $100,000 85,000 15,000 39,500 ($24,500)

Eliminate $0 0 0 39,500 ($39,500)

From my calculations, it looks to me that if Poway Company continues with the Erie Division, there will be a loss of $24,500 but there will also be a loss if the Erie Division was eliminated. So, I think it is up to Poway Company which risk they would want to take.