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# ch02 a - CHAPTER 2 AN INTRODUCTION TO COST TERMS AND...

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CHAPTER 2 AN INTRODUCTION TO COST TERMS AND PURPOSES 2-18 (15–20 min.) Classification of costs, service sector. Cost object: Each individual focus group Cost variability: With respect to the number of focus groups There may be some debate over classifications of individual items, especially with regard to cost variability. Cost Item D or I V or F A D V B I F C I V a D I F E D V F I F G D V H I V b a Some students will note that phone call costs are variable when each call has a separate charge. It may be a fixed cost if Consumer Focus has a flat monthly charge for a line, irrespective of the amount of usage. b Gasoline costs are likely to vary with the number of focus groups. However, vehicles likely serve multiple purposes, and detailed records may be required to examine how costs vary with changes in one of the many purposes served. 2-21 (20 min.) Variable costs, fixed costs, total costs. 1. Minutes/month 0 50 100 150 200 250 300 350 400 450 480 500 550 600 650 Plan A (\$/month) 0 4 8 12 16 20 24 28 32 36 38.40 40 44 48 52 Plan B (\$/month) 16 16 16 16 16 16 16 18.50 21 23.50 25 26 28.50 31 33.50 Plan C (\$/month) 20 20 20 20 20 20 20 20 20 20 20 20.80 22.80 24.8 0 26.80 2-1

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0 10 20 30 40 50 0 100 200 300 400 500 600 Number of long-distance minutes Total Cost Plan A Plan B Plan C 2. In each region, Compo chooses the plan that has the lowest cost. From the graph (or from calculations), we can see that if Compo expects to use 0–200 minutes of long-distance each month, she should buy Plan A; for 200–380 minutes, Plan B; and for over 380 minutes, Plan C. If Compo plans to make 100 minutes of long-distance calls each month, she should choose Plan A; for 300 minutes, choose Plan B; for 500 minutes, choose Plan C. 2-26 (20 min.) Total costs and unit costs 1.
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ch02 a - CHAPTER 2 AN INTRODUCTION TO COST TERMS AND...

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