Problem #1 Walters, LLC produc
Problem #1
Walters, LLC produces knockoff watches. Each watch sells for$40.00. Walters produced and sold 100 watches last year. Use thefollowing cost data to compute the variable cost per unit and thefixed cost for the period.
Volume 
Cost 
10 
$800.00 
20 
$1,100.00 
15 
$900.00 
18 
$1,050.00 
25 
$1,250.00 
a. Using the highlow method, determine the amount ofvariable cost per unit.
Answer: ________________________
b. Using the highlow method, determine the total amountof fixed costs.
Answer: ________________________
c. What is the variable cost ratio?
Answer: ________________________
d. What is the contribution margin perunit?
Answer: ________________________
e. What is the contribution margin ratio?
Answer: ________________________
f. How many watches must Walters sell to breakeven?
Answer: ________________________
g. What is the breakeven sales revenue?
Answer: ________________________
h. What was Walters’ operating income lastyear?
Answer: ________________________
i. What was Walters’ margin of safety?
Answer: ________________________
j. Assume the company has a desired net income of$1,500.
(1) How many sales dollarsmust the company earn?
Answer: ________________________
(2) How many watches must thecompany sell?
Answer: ________________________
Answer:
 All working forms part of the answer
 Answer are provided with workings, in a sequence as asked.
 Answer a) Variable cost per unit
Volume 
Cost 

Highest Level 
25 
$1250 
Lowest Level 
10 
$800 
Difference 
15 (B) 
$450 (A) 
Variable cost perunit [A/B] 
[450/15]$30 
Answer b) Total fixed cost = $500
Working 
HighLevel 
LowLevel 

A 
Total cost 
$1250 
$800 
B 
Volume 
25 
10 
C 
Variable cost per unit 
$30 
$30 
D=BxC 
Total Variable cost 
$750 
$300 
E=AD 
Total fixedcost 
$500 
$500 
Answer (c) to (j) in sequence
(C) 

Variable cost per unit 
30 
Sale Price per unit 
40 
Variable costratio 
75% 
(d) 

Sale Price per unit 
40 
Variable cost per unit 
30 
Contribution marginper unit 
$10 
(e) 

Contribution margin per unit 
10 
Sale Price per unit 
40 
Contribution marginratio 
25% 
(f) 

Fixed Cost 
500 
Contribution margin per unit 
10 
Watches to be soldfor break Even 
50watches 
(g) 

Break Even in no of watches 
50 
Sale Price per unit 
40 
Break Even Salesrevenue 
$2000 
(h) 

Contribution per unit 
10 
Units Sold last year 
100 
Total contribution margin 
1000 
()Fixed Cost 
500 
OperatingIncome 
$500 
(i) 

Total Revenues 
4000 
Break Even Revenues 
2000 
Margin ofSafety 
$2000 
(j) 

Desired Net Income 
1500 
Fixed Cost 
500 
Total contribution margin required 
2000 
Contribution per unit 
10 
(j2) No. of Units tosell 
200 
(j1) Sales Dollars toearn $1500 profit 
[200 x 40]$8000 