chapter 5 - 5-2a.Unit fixed costs decrease as volume...

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Unformatted text preview: 5-2a.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. 5-8a.Committedd.Committedb.Discretionarye.Committedc.Discretionaryf.Discretionary5-10The 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 Week1,8001,9002,000Fixed cost$1,100$1,100$1,100Variable cost 468 494 520 Total cost$1,568$1,594$1,620Cost per cup of coffee served *$0.871$0.839$0.810* Total cost ÷ cups of coffee served in a week2.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 coffeeExercise 5-3 1.MonthOccupancy-DaysElectrical CostsHigh activity level (August)...........................3,608$8,111Low activity level (October)........................... 186 1,712 Change.........................................................3,422$6,399Variable cost = Change in cost ÷ Change in activity = $6,399 ÷ 3,422 occupancy-days = $1.87 per occupancy-dayTotal cost (August)..........................................................................................................$8,111Variable cost element ($1.87 per occupancy-day × 3,608 occupancy-days)................................................. 6,747 Fixed cost element..........................................................................................................$1,3642.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.Additionally, fixed costs will be affected by how many days are in a month. In other words, costs like the costs of lighting common areas are variable with respect to the number of days in the month, but are fixed with respect to how many rooms are occupied during the month. Other, less systematic, factors may also affect electrical costs such as the frugality of individual guests. Some guests will turn off lights when they leave a room. Others will not.Exercise 5-6 1.The company’s variable cost per unit would be:$150,000=$2.50 per unit....
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This note was uploaded on 12/10/2011 for the course ACCT 208 taught by Professor Kingery during the Winter '08 term at University of Delaware.

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chapter 5 - 5-2a.Unit fixed costs decrease as volume...

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