Question 1: Cost flows, income statemen

You own a store. Beginning inventory on January 1 was $7,000. Ending inventory on December 31 was $7,500. You purchased $23,000 of new merchandise during the year. Sales revenue for the year was $46,000. Selling, general, and administrative (SG&A) costs for the year were $4,000.
a) Compute the cost of goods sold (COGS) for the year.

b) Prepare the income statement for the year.

Revenue	46000
COGS
Gross Margin
SG&A costs	4000
Profit

____________

Question 2: Cost structure estimation

Cost account	Amount	Fixed or variable?
direct labor	$8,000	variable
direct materials	$8,000	variable
depreciation	$8,000	Fixed
rent	$9,000	Fixed
administrative staff salaries	$7,000	Fixed

Production volume was 200 units.

a) Which cost structure estimation method should we use?

account classification method

B) Estimate the cost structure parameters:
total FC=$ = _______

unit VC=$ =_________
Write down the total cost equation:
TC = + * volume
(e.g., if TC=500+2*volume, enter 500 in the first box and 2 in the second box)

d) Predict the total cost of producing 250 units:

_____________________________________________

Question 3: Cost structure estimation

month	activity volume in units	total costs
Oct	90	$6,230
Nov	70	$6,300
Dec	105	$7,700

a) Which cost structure estimation method should we use? high-low method

b) To identify the low and high points, we should look for lowest/highest activiti

c) Estimate the cost structure parameters:
total FC=
unit VC=
Write down the total cost equatio
TC = + * volume

d) Predict the total costs of producing 90 units:
TC =