# Hsm/260 Week 4 Fixed Cost, Variable, Costs, Feb

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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:
Month Meals Served Total Costs
July 3,500 \$20,500
August 4,000 22,600
September 4,200 23,350
October 4,600 24,500
November 4,700 25,000
December 4,900 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?
Costs high-low \$26,000- \$20,500 = \$5,500
Meals high-low 4,900- 3,500 = 1,400
Variable cost per meal \$5,500 ÷ 1,400 = \$3.93
Variable cost for the low month \$13,755 ( 3,500x \$3.93)
Fixed costs \$6,745 (\$20,500-\$13,755)
3,665.76 meals per month × 12 months = 43,989.12 meals

PX = A + BX

5.77X = 6,745 + 3.93X
(Subtract 3.93X from each side.)
1.84X = 6,745
(Divide each side by 1.84)
X = 3,666 (monthly BEP)
3,666 × 12 = 43,992 (fiscal-year BEP)
45,000 meals – 43,992 meals = 1008 meals x \$1.84 revenue per meal = \$1,854.72 profit

Exercise 10.2
It has been two years…...

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... \$6,745 (\$20,500-\$13,755) 3,665.76 meals per month × 12 months = 43,989.12 meals PX = A + BX 5.77X = 6,745 + 3.93X (Subtract 3.93X from each side.) 1.84X = 6,745 (Divide each side by 1.84) X = 3,666 (monthly BEP) 3,666 × 12 = 43,992 (fiscal-year BEP) 45,000 meals – 43,992 meals = 1008 meals x \$1.84 revenue per meal = \$1,854.72 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 more staff resources. In order to help cover the cost of the new part-time assistant, the executive director has also decided to increase the annual subscription price of the newsletter to \$20. Additionally, the variable costs of preparing, printing, and mailing six bimonthly issues of the newsletter have risen to \$4.50. Recompute the BEP for the......

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