Ch_6_solutions

Ch_6_solutions - (5-10 min.) S 6-1Cost A is a variable...

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Unformatted text preview: (5-10 min.) S 6-1Cost A is a variable cost. The cost is constant on a per unit basis and increases in total as volume increases. Cost B is a fixed cost. The cost is constant in total, and decreases on a per unit basis as volume increases.Cost C is mixed. It is notconstant in total, and it is not constant on a per unit basis. (10 min.) S 6-2(5-10 min.) S 6-3Total fixed cost=$3.00 / basketball 12,000 basketballsTotal fixed cost=$36,000Since a volume of 15,000 basketballs is in the same relevant range, the total fixed costs will remain constant at $36,000Therefore, the new fixed cost per basketball will be:Fixed cost per basketball=Total fixed costNumber of basketballs producedFixed cost per basketball=$36,00015,000 Fixed cost per basketball=$2.40(5-10 min.) S 6-4a. Fixedy = fWhere y=total fixed costf=fixed amount over a period of time (vertical intercept)b. Mixedy = vx + fWhere y=total mixed costv=variable cost per unit of activity (slope)x=volume of activityf=fixed amount over a period of time (vertical intercept)c. Variabley = vxWhere y=total variable costv=variable cost per unit of activity (slope)x=volume of activity(5-10 min.) S 6-5Find the answer to Ritter Razors questions by 1) finding the companys cost equation, and then 2) using the cost equation to predict total costs at a differentvolume.First, determine the firms cost equation:Total costs=variable component+fixed componenty=vx+f$100,000=$40,000=f$60,000=fAlso, since:vx=$40,000 when x = 20,000v (20,000)=$40,000v=$2.00 per package of razorsTherefore, the production cost equation is:y = $2.00x + $60,000Predict total costs for other volumes in the same relevant range using the cost equation found above:y=($2.00 per package 25,000 packages) + $60,000y=$50,000 + $60,000y=$110,000Total production costs are predicted to be $110,000 when 25,000 packages of razors are produced.(5-10 min.) S 6-6Req. 1a.Call for 20 minutes$5.00 + (20 $0.35)$5.00 + $7.00 = $12.00b.Call for 40 minutes$5.00 + (40 $0.35)$5.00 + $14.00 = $19.00c.Call for 80 minutes$5.00 + (80 $0.35)$5.00 + $28.00 = $33.00Req. 2(5-10 min.) S 6-7a.Depreciation on equipment used to cut wood enclosures.......Fixedb.Wood for speaker enclosures.Variablec.Patents on crossover relaysFixedd.Crossover relays.Variablee.Grill cloth..Variablef.GlueVariableg.Quality inspectors salary.Fixed(10-15 min.) S 6-8Req. 1Scatterplot of Operating expenses and number of oil changes$0$5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,0005001000150020002500300035004000Number of oil changesMonthly operating expensesReq. 2There appears to be a very strong relationship between the companys operating expenses and the number of oil changes it performs. We There appears to be a very strong relationship between the companys operating expenses and the number of oil changes it performs....
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This note was uploaded on 10/08/2011 for the course ACCT 101 taught by Professor Kang during the Spring '08 term at S.F. State.

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Ch_6_solutions - (5-10 min.) S 6-1Cost A is a variable...

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