221 Solutions - Quick Check MC - Ch 06

# 221 Solutions - Quick Check MC - Ch 06 - Chapter 6 Cost...

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Chapter 6 Cost Behavior Quick Check Answers: QC-1. a QC-3. d QC-5. a QC-7. d QC-9. A QC-2. c QC-4. b QC-6. b QC-8. C QC-10. c Managerial Accounting 2e Solutions Manual 30

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Short Exercises (5-10 min.) S 6-1 Cost 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 not constant in total, and it is not constant on a per unit basis. Managerial Accounting 2e Solutions Manual 31
(10 min.) S 6-2 Chapter 6 Cost Behavior On each of the following graphs, the y-axis is “Total Cost” and the x-axis is “Volume of Activity” a. Step b. Fixed c. Curvilinear e. Variable d. Mixed (Any curved line) Y X Y X Y Y Y X X X 32

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(5-10 min.) S 6-3 Total fixed cost = \$3.00 / basketball × 12,000 basketballs Total fixed cost = \$36,000 Since a volume of 15,000 basketballs is in the same relevant range, the total fixed costs will remain constant at \$36,000 Therefore, the new fixed cost per basketball will be: Fixed cost per basketball = Total fixed cost Number of basketballs produced Fixed cost per basketball = \$36,000 15,000 Fixed cost per basketball = \$2.40 Managerial Accounting 2e Solutions Manual 33 Number of Basketballs produced
(5-10 min.) S 6-4 a. Fixed y = f Where y = total fixed cost f = fixed amount over a period of time (vertical intercept) b. Mixed y = vx + f Where y = total mixed cost v = variable cost per unit of activity (slope) x = volume of activity f = fixed amount over a period of time (vertical intercept) c. Variable y = vx Where y = total variable cost v = variable cost per unit of activity (slope) x = volume of activity Chapter 6 Cost Behavior 34

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(5-10 min.) S 6-5 Find the answer to Ritter Razor’s questions by: 1) finding the company’s cost equation, and then 2) using the cost equation to predict total costs at a different volume. First, determine the firm’s cost equation: Total costs = variable component + fixed component y = vx + f \$100,000 = \$40,000 = f \$60,000 = f Also, since: vx = \$40,000 when x = 20,000 v (20,000) = \$40,000 v = \$2.00 per package of razors Therefore, the production cost equation is: y = \$2.00x + \$60,000 Predict total costs for other volumes in the same relevant range using the cost equation found above: y = (\$2.00 per package × 25,000 packages) + \$60,000 y = \$50,000 + \$60,000 y = \$110,000 Total production costs are predicted to be \$110,000 when 25,000 packages of razors are produced. Managerial Accounting 2e Solutions Manual 35
(5-10 min.) S 6-6 Req. 1 a. Call for 20 minutes \$5.00 + (20 × \$0.35) \$5.00 + \$7.00 = \$12.00 b. Call for 40 minutes \$5.00 + (40 × \$0.35) \$5.00 + \$14.00 = \$19.00 c. Call for 80 minutes \$5.00 + (80 × \$0.35) \$5.00 + \$28.00 = \$33.00 Req. 2 Chapter 6 Cost Behavior 36

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(5-10 min.) S 6-7 a. Depreciation on equipment used to cut wood enclosures………………………………………. ...... Fixed b. Wood for speaker enclosures………………………. Variable
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221 Solutions - Quick Check MC - Ch 06 - Chapter 6 Cost...

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