LN05-ch05-solutions-selfstudy-AFM102s08

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

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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 firms cost structure. The reason is that all costs dont 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 firms activities on its costs will not be known until after the activity has occurred. chapter 5 page 2 of 2...
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This note was uploaded on 07/12/2010 for the course AFM 102 taught by Professor R.ducharme during the Spring '09 term at Waterloo.

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

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