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Ch%202%20Selected%20Problem%20Solutions

# Ch%202%20Selected%20Problem%20Solutions - CHAPTER 2 AN...

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CHAPTER 2 AN INTRODUCTION TO COST TERMS AND PURPOSES Selected Problem Solutions 2-19 (15–20 min.) Classification of costs, merchandising sector. Cost object: Videos sold in video section of store Cost variability: With respect to changes in the number of videos sold There may be some debate over classifications of individual items, especially with regard to cost variability. Cost Item D or I V or F A D F B I F C D V D D F E I F F I V G I F H D V 2-21 (20 min.) Variable costs, fixed costs, total costs. 1. Minutes/month 0 50 100 150 200 250 300 350 400 450 480 500 550 600 650 Plan A (\$/month) 0 4 8 12 16 20 24 28 32 36 38.40 40 44 48 52 Plan B (\$/month) 16 16 16 16 16 16 16 18.50 21 23.50 25 26 28.50 31 33.50 Plan C (\$/month) 20 20 20 20 20 20 20 20 20 20 20 20.80 22.80 24.80 26.80 0 10 20 30 40 50 0 100 200 300 400 500 600 Number of long-distance minutes Total Cost Plan A Plan B Plan C 2. In each region, Compo chooses the plan that has the lowest cost. From the graph (or from calculations), we can see that if Compo expects to use 0–200 minutes of long-distance each month, she should buy Plan A; for 200–380 minutes, Plan B; and for over 380 minutes, Plan C.

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