Lesson 14 Managerial Accounting II: Applications Exercise 1. XYZ Company's most recent contribution format income statement is presented below: Sales $250000  Less: Variable Expenses $150000  Contribution Margin $100000  Less: Fixed Expenses $120000  Net Loss $(20000)  The company sells its only product for $50 per unit. There were no beginning or ending inventories. Required: Compute the company's break-even point in units sold. Compute the total variable expenses at the break-even point. How many units would have to be sold to earn a target profit of $30000? The sales manager is convinced that a $20000 increase in the advertising budget would increase total sales by $90000. Would you advise the increased advertising outlay? 2. XYZ Company operates a local parcel delivery service. The company keeps detailed records relating to operating costs of trucks, and has found that if a truck is driven 220000 kilometres per year, the operating cost is 15 cents per kilometre. This cost increases to 17.5 cents per kilometre if a truck is driven 120000 kilometres per year. Required: Estimate the cost formula for truck operating costs using the high-low method.