Name: Date:

Instructor: Course:
Managerial Accounting, Third Edition by James Jiambalvo
Solving Managerial Accounting Problems Using Microsoft Excel
for Windows Templates by Rex A Schildhouse
PROBLEM P4-9 - High-Low, Profit Equation
Rhetorix, Inc. produces stereo speakers. Each unit (a pair of speakers) sells for $800 Below is
information on production/sales and costs for 2007.

Selling and
Production and Production Admin.
Sales in Units Costs Costs
January 100 $83,400 $22,700
February 112 92,300 24,500
March 92 79,000 21,700
April 101 82,900 23,300
May 110 89,800 24,200
June 120 96,500 25,300
July 123 98,900 26,000
August 127 102,300 26,200
September 133 108,900 27,200
October 121 98,000 25,600
November 119 96,000 26,100
December 103 89,500 24,100
Total 1,361 $1,117,500 $296,900
Average cost per unit $821.08744 $218.14842

Required
a. Use the high-low method to identify the fixed and variable cost components for both production costs and selling and
administrative costs.

Production costs:
( Amount - Amount ) ÷ ( Number - Number ) =

Formula variable cost per unit.

Amount - ( Amount * Number ) = Amount

Selling and administrative costs:

( Amount - Amount ) ÷ ( Number - Number ) =

Formula variable cost per unit.

Amount - ( Amount * Number ) = Formula

b. The company estimates that production and sales in 2008 will be 1,500 units. Based on this estimate,
forecast income before taxes for 2008.

Sales ( Number units * Amount ) = Formula

Less production costs:

( Amount * Number ) + ( Amount * Number ) =

Formula

Less selling and admin:

( Amount * Number ) + ( Amount * Number ) =

Formula

Income (Loss): Formula

56450284.xls, Problem P4-9, Page 1 of 6, 04/22/2011, 09:40:56

 Name: Solution Date:
Instructor: Course:
Managerial Accounting, Third Edition by James Jiambalvo
Solving Managerial Accounting Problems Using Microsoft Excel
for Windows Templates by Rex A Schildhouse
PROBLEM P4-9 - High-Low, Profit Equation
Rhetorix, Inc. produces stereo speakers. Each unit (a pair of speakers) sells for $800 Below is
information on production/sales and costs for 2007.

Selling and
Production and Production Admin.
Sales in Units Costs Costs
January 100 $83,400 $22,700
February 112 92,300 24,500
March 92 79,000 21,700
April 101 82,900 23,300
May 110 89,800 24,200
June 120 96,500 25,300
July 123 98,900 26,000
August 127 102,300 26,200
September 133 108,900 27,200
October 121 98,000 25,600
November 119 96,000 26,100
December 103 89,500 24,100
Total 1,361 $1,117,500 $296,900
Average cost per unit $821.08744 $218.14842

Required
a. Use the high-low method to identify the fixed and variable cost components for both production costs and selling and
administrative costs.

Production costs:
( $108,900.00 - $79,000.00 ) ÷ ( 133 - 92 ) =

$729.27 variable cost per unit.

$108,900.00 - ( $729.27 * 133 ) = $11,907.09

Selling and administrative costs:

( $27,200.00 - $21,700.00 ) ÷ ( 133 - 92 ) =

$134.15 variable cost per unit.

$27,200.00 - ( $134.15 * 133 ) = $9,358.05

b. The company estimates that production and sales in 2008 will be 1,500 units. Based on this estimate,
forecast income before taxes for 2008.

Sales ( 1,500 units * $800.00 ) = $1,200,000.00

Less production costs:

( $11,907.09 * 12 ) + ( $729.27 * 1,500 ) =

$1,236,790.08

Less selling and admin:

( $9,358 * 12 ) + ( $134.15 * 1,500 ) =

$313,521

Income (Loss): ($350,311)

56450284.xls, Problem P4-9 Solution, Page 2 of 6, 04/22/2011, 09:40:57

Instructions for the Microsoft Excel Templates

Detail and information on Excel is contained within the manual.

Striking the "F1" key or following the path "Windows>Excel Help" will invoke the Office Assistant
and bring up one of several help menus.

Type your name into the cell "D2". This will be copied by formula to the rest of the pages as required.

Type the date into cell "I2". This will be copied by formula to the rest of the pages as required.

Type the instructor's name into cell "D3". This will be copied by formula to the rest of the pages as required.

Type the course identifier into cell "I3". This will be copied by formula to the rest of the pages as required.

The problem is identified for you in cell "B7".

In "DATE" cells enter the date in any of several formats and Excel will format it correctly.
These can include 01/01/06, 01/01/2006, and Jan 01, 2006.

If more than one page is preformatted into the problem, page breaks are preset and formulas are
set to copy the header into the remaining pages.

Place the proper account title in the cell where the word "ACCOUNT" appears on the template.

In cells containing "AMOUNT" you can enter a value such as 92.21 or 1002.82. Do not enter values with commas such
as 59,879.45. Excel does not like the comma.

In most exercises and problems, the text is structured in a manner to put the amounts in cells so that "look-to (=A1) type
formulas can be used.

A formula may be placed in many of the cells containing "AMOUNT."

In cells that contain "NUMBER", the value indicates that something like number of parts, number of gallons, or number
of units sold should be entered.

Write a formula into cells where the word "FORMULA" appears. In these cells, an amount calculated outside of Excel
can be entered into Excel if desired.

Place the explanation for the entry in the cell where "EXPLANATION" or "TEXT ANSWER HERE." appears on the template.

Insert the account number where "ACCT #" appears on the template during posting.

Insert the journal reference where "JOURN #" appears on the template during posting.

Insert the title in the cell where "TITLE" appears on the template.

The print area is defined to fit onto 8 1/2" X 11" sheets in portrait or landscape mode as required.

The gray filled cells define the perimeter of the problem and the print area.
The problem is formatted for whole dollars with comma separations (no cents) except where required.

The display may have "Freeze Pane" invoked so column titles remain visible during data entry.

Negative values may be shown as ($400) vice -$400.

on the template.