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LN05-ch05-solutions-selfstudy-AFM102s08

# LN05-ch05-solutions-selfstudy-AFM102s08 - 5,920 Total...

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Exercise 5-11 1. Kilometres  Driven Total Annual  Cost* High level of activity. ........................... 105,000 \$11,970 Low level of activity. ............................   70,000         9,380     Change. ..............................................   35,000     \$ 2,590 105,000 kilometres x \$0.114 per kilometre = \$11,970  70,000 kilometres x \$0.134 per kilometre = \$9,380 Variable cost per kilometer:   Change in cost  Change in activity = \$2,590 35,000 kilometres =\$0.074 per kilometre. Fixed cost per year: Total cost at 105,000 kilometres. ....................... \$11,970 Less variable portion:  105,000 kilometres x \$0.074 per kilometre. ....       7,770     Fixed cost per year. ........................................... \$ 4,200 2. Y = \$4,200 + \$0.074X 3. Fixed cost. ............................................................. \$ 4,200 Variable cost:  80,000 kilometres x \$0.074 per kilometre.

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Unformatted text preview: .......... 5,920 Total annual cost. .................................................. \$10,120 chapter 5 page 1 of 2 Problem 5-16 1. a. 3 c. 11 e . 4 g. 2 i. 9 b. 6 d. 1 f. 10 h. 7 2. Without a knowledge of the underlying cost behaviour patterns, it would be difficult if not impossible for a manager to properly analyze the firm’s cost structure. The reason is that all costs don’t behave in the same way. One cost might move in one direction as a result of a particular action, and another cost might move in an opposite direction. Unless the behaviour pattern of each cost is clearly understood, the impact of a firm’s activities on its costs will not be known until after the activity has occurred. chapter 5 page 2 of 2...
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LN05-ch05-solutions-selfstudy-AFM102s08 - 5,920 Total...

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