Kennett Company manufactures and sells a single product. Sales peak in March and generally
bottom out in October. The following cost and volume information were extracted from
accounting records.
Production and sales (units)
Total cost incurred
March
25,000
$195,300
July*
19,000
$176,200
October
14,000
$156,800
An average month.
The company's product sells for $9.00 per unit.
You are required to:
a. Using the high-low method, compute Kennett's variable cost per unit and total monthly fixed
cost.
b. Compute the firm's contribution margin per unit.
c. Determine the break-even point in units and dollar sales (using contribution margin ratio).
d. Determine the sales volume (in units) required to generate a target income of $29,150 per
month.