chapter 5 - 52 a b c d 58 a Committed b Discretionary c...

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5-2 a. Unit fixed costs decrease as volume increases. b. Unit variable costs remain constant as volume increases. c. Total fixed costs remain constant as volume increases. d. Total variable costs increase as volume increases.  5-8 a. Committed d. Committed b. Discretionary e. Committed c. Discretionary f. Discretionary 5-10 The high-low method uses only two points to determine a cost formula. These two points are likely to be less than typical since  they represent extremes of activity.  Exercise 5-1   1. Cups of Coffee Served  in a Week 1,800 1,900 2,000 Fixed cost $1,100 $1,100 $1,100 Variable cost         468             494             520     Total cost $1,568 $1,594 $1,620 Cost per cup of coffee served * $0.871 $0.839 $0.810 * Total cost  ÷  cups of coffee served in a week 2. The average cost of a cup of coffee declines as the number of cups of coffee served increases because the fixed cost is spread  over more cups of coffee Exercise 5-3   1. Month Occupancy-Days Electrical Costs High activity level (August) ........................... 3,608 $8,111 Low activity level (October) ...........................     186       1,712     Change ......................................................... 3,422 $6,399 Variable cost = Change in cost  ÷  Change in activity  = $6,399  ÷  3,422 occupancy-days  = $1.87 per occupancy-day Total cost (August) .......................................................................................................... $8,111 Variable cost element  ($1.87 per occupancy-day  ×  3,608 occupancy-days) .................................................   6,747     Fixed cost element .......................................................................................................... $1,364 2. Electrical costs may reflect seasonal factors other than just the variation in occupancy days. For example, common areas such as  the reception area must be lighted for longer periods during the winter. This will result in seasonal effects on the fixed electrical  costs.
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