EXERCISE 5

# EXERCISE 5 - EXERCISE 5-1(a The determination as to whether...

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EXERCISE 5-1 (a) The determination as to whether a cost is variable, fixed, or mixed can be made by comparing the cost in total and on a per-unit basis at two different levels of production. Variable Costs Fixed Costs Mixed Costs Vary in total but remain constant on a per-unit basis. Remain constant in total but vary inversely with changes in activity on a per-unit basis. Contain both a fixed element and a variable element. Vary both in total and on a per-unit basis. (b) Using these criteria as a guideline, the classification is as follows: Direct materials Direct labor Utilities Variable Variable Mixed Rent Maintenance Supervisory salaries Fixed Mixed Fixed EXERCISE 5-2 (a) \$17,800 – 11,500 = \$6,300 = \$1.20 variable cost per mile driven 14,250 mi. – 9,000 mi. 5,250 mi. Activity Level High Low Total costs \$17,800 \$11,500 Less variable costs: 14,250 X \$1.20 17,100 9,000 X \$1.20 ______ 10,800 Total fixed costs \$ 700 \$ 700 Monthly operating costs are: \$700 per month plus \$1.20 per mile driven

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## This note was uploaded on 05/16/2011 for the course AC 303 taught by Professor Richardkido during the Spring '11 term at Chaminade University.

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EXERCISE 5 - EXERCISE 5-1(a The determination as to whether...

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