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2/1/12 McGraw-Hill's Connect - Ebook 1/11 Managerial Accounting, eBook 14/e Content Chapter2: Managerial Accounting and Cost Concepts Problems All applicable problems are available with McGraw-Hill's Connect Accounting . PROBLEM 2-14 Contribution Format versus Traditional Income Statement [LO5 ] House of Organs, Inc., purchases organs from a well-known manufacturer and sells them at the retail level. The organs sell, on the average, for $2,500 each. The average cost of an organ from the manufacturer is $1,500. The costs that the company incurs in a typical month are presented below: During November, the company sold and delivered 60 organs. Required: 1. Prepare a traditional income statement for November. 2. Prepare a contribution format income statement for November. Show costs and revenues on both a total and a per unit basis down through contribution margin. 3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis? 2/1/12 McGraw-Hill's Connect - Ebook 2/11 PROBLEM 2-15 Identifying Cost Behavior Patterns [LO3 ] A number of graphs displaying cost behavior patterns are shown on the next page. The vertical axis on each graph represents total cost and the horizontal axis represents the level of activity (volume). Required: 1. For each of the following situations, identify the graph that illustrates the cost behavior pattern involved. Any graph may be used more than once. a. Electricity billa flat fixed charge, plus a variable cost after a certain number of kilowatt- hours are used. b. City water bill, which is computed as follows: c. Depreciation of equipment, where the amount is computed by the straight-line method.... View Full Document

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