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UNIT 18 study guide - Total Cost = fixed cost(Variable cost...

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UNIT 18 1) Variable costs are costs which vary IN TOTAL as production volume changes. Chlorine •Distilled water •Plastic bottles and lids •Labels •Electricity to run the filling equipment •Direct labor operating the filling equipment •Maintenance on the equipment Fixed costs are costs which do NOT vary as production volume changes. •Rent on the factory building •Fire insurance on the factory •Depreciation on the equipment •Plant Managers’ salaries 3) When provided with Total Fixed Costs, and Variable Cost per unit, calculate total cost for any level of volume - Y= a+ bx
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Unformatted text preview: - Total Cost = fixed cost + (Variable cost per unit x units produced) 1) Relevant range a. Range of volume b. ?? c. Relevant range is a specific activity level that is bounded by a minimum and maximum amount. Within that range of activities, certain revenue or cost levels can be expected to occur. fixed: costs that do NOT vary as volume changes (rent, depreciation, fire insurance) -variable: vary in total as volume changes (chlorine, distilled water, electricity) -mixed: flat base rate + per unit charge (machine rentals, usage charges, contracts)...
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