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Chapter 20: Q1TI (page 1095)

Following is a list of costs for a furniture manufacturer that specializes in wood tables. Classify each cost as variable, fixed, or mixed relative to the number of tables produced and sold.

1. Wood used to build tables

2. Depreciation on saws and other manufacturing equipment

3. Compensation for sales representatives paid on a salary plus commission basis

4. Supervisor鈥檚 salary

5. Wages of production workers

Short Answer

Expert verified
  1. variable cost
  2. Fixed cost
  3. Mixed cost
  4. Fixed cost
  5. Variable cost

Step by step solution

01

Meaning of variable, fixed, and mixed cost

The cost that consistent persistently per unit is known as a variable cost and the cost that remains consistent in total is known as a fixed cost. A cost that is fixed to an extent and variable above that is known as mixed cost.

02

Classification of cost

S. No.

Costs

Type of cost

1

Wood used to build tables

Variable

2

Depreciation on saws and other manufacturing equipment

Fixed

3

Compensation for sales representatives paid on a salary plus commission basis

Mixed

4

Supervisor鈥檚 salary

Fixed

5

Wages of production workers

Variable

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Most popular questions from this chapter

The budgets of four companies yield the following information:

Company

Beach Lake Mountain Valley

Net Sales Revenue \( 1,615,000 \)(d) \( 1,050,000 \)(j)

Variable Costs (a) 60,000 525,000 100,800

Fixed Costs (b) 232,000 260,000 (k)

Operating Income (Loss) 285,600 (e) (g) 31,500

Units Sold 170,000 10,000 (h) (l)

Contribution Margin per Unit \( 3.80 \) (f) \( 75.00 \) 9.00

Contribution Margin Ratio (c) 80% (i) 30%

Requirements

1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.)

2. Which company has the lowest breakeven point in sales dollars?

3. What causes the low breakeven point?

Determining mixed costs鈥攖he high-low method

The manager of Trusty Car Inspection reviewed the monthly operating costs for the past year. The costs ranged from \(4,300 for 1,300 inspections to \)3,900 for 900 inspections.

Requirements

1. Use the high-low method to calculate the variable cost per inspection.

2. Calculate the total fixed costs.

3. Write the equation and calculate the operating costs for 1,000 inspections.

4. Draw a graph illustrating the total cost under this plan. Label the axes, and show the costs at 900, 1,000, and 1,300 inspections.

Question: Computing contribution margin, units and required sales to break even, and units to achieve target profit

Compute the missing amounts for the following table.

A B C Sales price per unit \( 200 \) 4,000 $ 5,220 Variable costs per unit 80 1,000 2,088 Total fixed costs 73,200 660,000 3,758,400 Target profit 266,760 3,000,000 3,132,000 Calculate: 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥� 鈥�

Contribution margin per unit 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥� 鈥�

Contribution margin ratio 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥� 鈥�

Required units to break even 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥冣�冣�� 鈥� 鈥� 鈥� 鈥� 鈥�

Required sales dollars to break even

Required units to achieve target profit

Using the high-low method

Mark owns a machine shop. In reviewing the shop鈥檚 utility bills for the past 12 months, he found that the highest bill of \(2,600 occurred in August when the machines worked 1,200 machine hours. The lowest utility bill of \)2,300 occurred in December when the machines worked 600 machine hours.

Requirements

1. Use the high-low method to calculate the variable cost per machine hour and the total fixed utility cost.

2. Show the equation for determining the total utility cost for the machine shop.

3. If Mark anticipates using 800 machine hours in January, predict the shop鈥檚 total utility bill using the equation from Requirement 2.

Scotty鈥檚 Scooters plans to sell a standard scooter for \(55 and a chrome scooter for \)70. Scotty鈥檚 purchases the standard scooter for \(30 and the chrome scooter for \)40. Scotty鈥檚 expects to sell one standard scooter for every three chrome scooters. Scotty鈥檚 monthly fixed costs are \(23,000.

Requirements

1. How many of each type of scooter must Scotty鈥檚 Scooters sell each month to break even?

2. How many of each type of scooter must Scotty鈥檚 Scooters sell each month to earn \)25,300?

3. Suppose Scotty鈥檚 expectation to sell one standard scooter for every three chrome scooters was incorrect and for every four scooters sold two are standard scooters and two are chrome scooters. Will the breakeven point of total scooters increase or decrease? Why? (Calculation not required.)

See all solutions

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