The following data will help answer questions 1 to 5:

XYZ Co. produces one product. The following data shows the number of units of product
made in the last few months of last year and the total costs incurred during the month:

Month Units Total Costs

September:  100 $32,000
October:  50 $25,000
November:  60 $24,000
December:  90 $31,000
1) Using the high-low method, estimate the variable cost per unit of XYZ's product.
2) Using the high-low method, estimate the total fixed cost of XYZ's product.

The following is the output of a regression analysis of the cost:

3) According to the regression analysis, estimate the variable cost per unit of XYZ's
product.
4) According to the regression analysis, estimate the total fixed cost of XYZ's
product.
5) Can you rely on this estimate? (Explain your answer.)

The following information is useful in answering questions 6 to 9:

ABC, Inc's Manufacturing produces two products, A & B. The firm has fixed costs of
$28,000, and the details of per unit costs are as follows: 

  A B
Unit selling price  $      200  $     150
Unit variable costs  $      140  $     100
 $       
Unit fixed costs 50  $       50
Engineering hours per
unit             6             2
Machine hours per unit             5             5
Set-ups per unit             1             2
      A     B
Sales mix 60% 40%

6) Assuming the sales mix shown, how many units of Product A should ABC have
sold at the break-even point?

7) If production capacity is limited by the number of engineering hours available,

which product should you make and sell to maximize profits? (Show your
calculations on your notes.)
 Product A?
 Product B?
 Both are the same?

8) Briefly state your reasons for choosing the product you identified in question 7.

9) Assuming ABC sells only the product you identified in question 7, what is the
total sales dollars Acme requires to achieve an after-tax profit of $15,000 (assume
a 20% tax rate)?

The following information is useful for question 10 to 12:

The Acme Company uses 2000 units of Product X per year. The full manufacturing cost per
unit of Product X at this volume is:

Sales price per unit  $      16.00

Direct costs per unit            6.00
Variable overhead per
unit            3.00
Fixed overhead per unit            4.00
Income per unit  $        3.00
Standard cost per unit  $      13.00
An outside supplier has offered to supply Acme with Product X at a cost of $12 per unit. If
Acme accepts this offer, it can eliminate 50% of fixed costs associated with Product X. And
Acme could devote the space currently used to manufacture Product X to manufacturing
Product Y, which would yield a net cash in-flow of $3,000.

10)Calculate the dollar value of the increase (or decrease) in annual profits if Acme uses
the outside supplier to make Product X. (Show a decrease as a negative number.)
11)Based on your analysis above, should Acme make or buy Product X?

 Make
 Buy
 Both are the same

12) What qualitative factors might change your decision in this case? (List at least two
relevant factors.)