Chapter 5 Demo Solution

# Chapter 5 Demo Solution - BriefExercise51(15minutes 1...

This preview shows pages 1–4. Sign up to view the full content.

Brief Exercise 5-1  (15 minutes) 1. Cups of Coffee Served  in a Week 1,800 1,900 2,000 Fixed cost \$1,100 \$1,100 \$1,100 Variable cost         468             494             520     Total cost \$1,568 \$1,594 \$1,620 Cost per cup of coffee served * \$0.871 \$0.839 \$0.810 * Total cost ÷ cups of coffee served in a week 2. The average cost of a cup of coffee declines as the number of  cups of coffee served increases because the fixed cost is spread  over more cups of coffee.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Brief Exercise 5-2  (30 minutes) 1. The completed scattergraph is presented below: 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 0 2,000 4,000 6,000 8,000 10,000 Units Processed Total Cost
Brief Exercise 5-2  (continued) 2. (Students’ answers will vary considerably due to the inherent  imprecision and subjectivity of the quick-and-dirty scattergraph  method of estimating variable and fixed costs.)  The approximate monthly fixed cost is \$6,000—the point where the  straight line intersects the cost axis.  The variable cost per unit processed can be estimated as follows  using the 8,000-unit level of activity, which falls on the straight line:

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 08/31/2010 for the course AEM 3230 taught by Professor Little,j.e. during the Spring '08 term at Cornell.

### Page1 / 6

Chapter 5 Demo Solution - BriefExercise51(15minutes 1...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online