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10 - [Determining fixed/variable/mixed costs EX1Kenneys...

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[Determining fixed/variable/mixed costs] EX1…Kenney’s Parts is an automotive parts retail store. Assume that activity is defined as the number of products sold. Wages paid to employees who wait on customers who are paid a base salary plus commission = fixed (base salary) + variable (commission) = mixed Cost of shelving for the showroom = fixed (one time purchase) Fire insurance paid on retail store = fixed (repeated, but fixed cost) Cost of quarts of oil = variable (changes based on demand) EX2…Marsha’s Legal Services offers clients a variety of legal services. Activity is measured as the number of hours of legal service provided. Nicky hires Marsha to handle her divorce. She is billed for the hours worked. = variable Paul hires Marsha for estate planning. He is billed a research fee plus time worked. = mixed Michelle hires Marsha to handle her real estate transactions. This is an on- going situation for which Michelle pays a monthly fee. = fixed [Estimating costs and revenue] FC + (VC x Q) = TC
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