Number of patients
6.
Cost of sales at an electronics store
Dollar sales
7.
Cost of testing materials used in a medical lab
Tests run
8.
Cost of heating an electronics store
Dollar sales
9.
Cost of electricity for production equipment at a surfboard manufacturer
Surfboards produced
10.
Depreciation on shelving at a book store
Dollar sales
Required:
For each item above, indicate whether the cost is MAINLY fixed or variable with respect to the possible measure of activity listed next to it.
Answer:
1. Salary of production manager at a surfboard manufacturer; Surfboards produced; Fixed
2. Cost of solder used in making computers; Computers produced; Variable
3. Cost of dough used at a pizza shop; Pizzas cooked; Variable
4. Janitorial wages at a surfboard manufacturer; Surfboards produced; Fixed
5. Salary of the controller at a hospital; Number of patients; Fixed
6. Cost of sales at an electronics store; Dollar sales; Variable
7. Cost of testing materials used in a medical lab; Tests run; Variable
8. Cost of heating an electronics store; Dollar sales; Fixed
9. Cost of electricity for production equipment at a surfboard manufacturer; Surfboards produced; Variable
10. Depreciation on shelving at a book store; Dollar sales; Fixed
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
291) At an activity level of 6,800 units, Henkes Corporation's total variable cost is $125,188 and its total fixed cost is $164,152.
Required:
For the activity level of 7,100 units, compute: (a) the total variable cost; (b) the total fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed cost per unit; and (f) the average total cost per unit. Assume that this activity level is within the relevant range.
Answer: Variable cost = $125,188 ÷ 6,800 units = $18.41 per unit
Activity level
7,100
Total cost:
Variable cost (a) [7,100 units × $18.41 per unit]
$
130,711
Fixed cost (b)
164,152
Total (c)
$
294,863
Cost per unit:
Variable cost (d)
$
18.41
Fixed cost (e) [$164,152 ÷ 7,100 units]
23.12
Total (f)
$
41.53
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
292) Hinrichs Corporation reports that at an activity level of 2,400 units, its total variable cost is $174,504 and its total fixed cost is $55,080.
Required:
For the activity level of 2,700 units, compute: (a) the total variable cost; (b) the total fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed cost per unit; and (f) the average total cost per unit. Assume that this activity level is within the relevant range.
Answer: Variable cost = $174,504 ÷ 2,400 units = $72.71 per unit
Activity level
2,700
Total cost:
Variable cost (a) [2,700 units × $72.71 per unit]
$
196,317
Fixed cost (b)
55,080
Total (c)
$
251,397
Cost per unit:
Variable cost (d)
$
72.71
Fixed cost (e) [$55,080 ÷ 2,700 units]
20.40
Total (f)
$
93.11
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement