Chapter 4 - Solution

# Chapter 4 - Solution - ACC 377 SUMMER 2010 CHAPTER 4...

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ACC 377 SUMMER 2010 CHAPTER 4 HOMEWORK SOLUTIONS Exercises 1. a. Variable b. Variable c. Fixed d. Variable e. Fixed f. Variable g. Variable h. Variable i. Fixed j. Variable k. Variable l. Variable m. Variable n. Variable o. Fixed p. Variable q. Fixed r. Variable s. Variable

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2. The highest data point would be 900 labor hours at \$11,000. The lowest data point would be 400 labor hours at \$6,000. Therefore: \$11,000 - \$6,000 = \$5,000 = \$10.00 per hour 900 - 400 hours 500 hours If Total Costs = Variable Costs + Fixed Costs, then at the highest data point, you get the following: TC = \$10(VC) + FC \$11,000 = \$10(900) + FC \$11,000 = \$9,000 + FC FC = \$2,000 NOTE: You could have also used the lowest data point to get to the fixed costs: TC = \$10(VC) + FC \$6,000 = \$10(400) + FC \$6,000 = \$4,000 + FC FC = \$2,000 Therefore, the total cost equation would be: TC = \$10(VC) + \$2,000
a. Variable Fixed Total DM \$7.00 \$7.00 DL \$8.00 \$8.00 FOH \$3.00 \$2.00 \$5.00 \$18.00 \$2.00 \$20.00 At 12,000 bottles of production, the fixed cost per unit is \$2. This means fixed costs are \$24,000 The total cost equation would be as follows: TC = \$18(VC) + \$24,000 Therefore, at 10,000 units of production, the total cost would be: TC = \$18(10,000) + \$24,000 TC = \$180,000 + \$24,000 TC = \$204,000 The unit cost at this level of production would be: Total costs \$204,000 Units produced 10,000 Unit cost \$20.40 b. The total cost equation would be as follows: TC = \$18(VC) + \$24,000 Therefore, at 20,000 units of production, the total cost would be: TC = \$18(20,000) + \$24,000 TC = \$360,000 + \$24,000 TC = \$384,000 The unit cost at this level of production would be: Total costs \$384,000 Units produced 20,000 Unit cost \$19.20 c. Fixed costs do not vary in total with respect to volume, but the cost per unit changes as volume changes. The more units produced, the lower the cost per unit.

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Chapter 4 - Solution - ACC 377 SUMMER 2010 CHAPTER 4...

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