ch10 - X is the number of miles traveled in the day 3...

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10-1 The two assumptions are 1. Variations in the level of a single activity (the cost driver) explain the variations in the related total costs. 2. Cost behavior is approximated by a linear cost function within the relevant range. A linear cost function is a cost function where, within the relevant range, the graph of total costs versus the level of a single activity forms a straight line. 10-17 (15 min.) Identifying variable-, fixed-, and mixed-cost functions. 1. See Solution Exhibit 10-17. 2. Contract 1: y = \$50 Contract 2: y = \$30 + \$0.20 X Contract 3: y = \$1 X where
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Unformatted text preview: X is the number of miles traveled in the day. 3. Contract Cost Function 1 2 3 Fixed Mixed Variable SOLUTION EXHIBIT 10-17 Plots of Car Rental Contracts Offered by Pacific Corp. 10-18 (20 min.) Various cost-behavior patterns. 1. K 2. B 3. G 4. J Note that A is incorrect because, although the cost per pound eventually equals a constant at \$9.20, the total dollars of cost increases linearly from that point onward. 5. I The total costs will be the same regardless of the volume level. 6. L 7. F This is a classic step-cost function. 8. K 9. C...
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