Fixed Costs, Variable Costs, and Break-Even Point

Topics: Costs, Variable cost, Fixed cost Pages: 3 (480 words) Published: February 10, 2011
Assignment: Fixed Costs, Variable Costs, and Break-Even Point

Exercise 10.1

During the sixth month of the fiscal year, the program director of the Westchester Home-Delivered Meals (WHDM) program decides to again recompute fixed costs, variable costs, and the BEP using the high–low method. Here are the number of meals served and the total costs of the program for each of the first six months:

MonthMealsServed Total Costs
July3,500\$20,500.
August4,000\$22,600.
September4,200\$23,350.
October4,600\$24,500.
November4,700\$25,000.
December4,900\$26,000.

Recompute fixed costs, variable costs, and the BEP. What are the variable costs? What are the fixed costs? How many meals will the WHDM program need to provide during the fiscal year to reach the BEP? How much profit will the program earn if it completes its 45,000-meal contract with the City of Westchester?

Meals: High-Low=
Cost: High-Low=

The variable cost per meal:
The variable cost for the low month:
Fixed cost:

(Monthly BEP)
(Fiscal-year BEP)

WHDM program profit analysis
= meal contract
Break Even Point (BEP) =
1,008 Revenue
1,008 Meals at
Total Cost Per meal
Total Profit =

Exercise 10.2

It has been two years since the New River Community Council (NRCC) started its newsletter dealing with state and community funding opportunities for human service agencies. The current number of subscribers to the newsletter is 525. During the second year, the NRCC hired a new part-time newsletter coordinator (social work student). The NRCC has raised the salary of the part-time newsletter coordinator to \$6,000 per year and has also hired another part-time student as an assistant for ten hours a week. The assistant is to be paid \$75 per week or \$3,900 per year. Together the newsletter coordinator and the part-time assistant believe they can handle up to 650 newsletter subscribers. Beyond this number, the newsletter program will require still...