# Ch 5-6 - variable costs would increase by 35%. Should the...

This preview shows pages 1–2. Sign up to view the full content.

Ch. 5 – Exercises E5-1 (a) Define the terms variable costs, fixed costs, and mixed costs. Variable costs are costs that vary in total directly and proportionately with changes in the activity level. Fixed costs are costs that remain the same in total regardless of changes in the activity level. Mixed costs are costs that contain both a variable element and a fixed element. (b) Classify each cost above as either variable, fixed, or mixed. Variable costs – Direct Material, Direct Labor Fixed costs – Rent, Supervisory Salaries Mixed costs – Utilities, Maintenance Ch. 5 – Exercises E5-9 (a) Calculate the break-even point in (1) dollars and (2) number of fares. 1) (20,250/27,000) x 45,000 = \$33,750 2) 33,750/(45,000/300) = 225 fares (b) Without calculations, determine the contribution margin at the break-even point. Contribution margin at Break-even point must be equal to fixed costs. (c) If fares were decreased by 10%, an additional 100 fares could be generated. However,

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: variable costs would increase by 35%. Should the fare decrease be adopted? No, I do not think that the fare decrease should be adopted. The variable amount increase does not favor them with only a 10% decrease and 100 additional fares. Ch. 6 – Exercises E6-7 Determine whether each of the three joint products should be sold as is, or processed further. SARCO - Sell as is. Sell as is: \$200,000 Process further: \$300,000 - \$120,000 = \$180,000 Incremental loss: \$20,000 BARCO - Process further. Sell as is: \$300,000 Process further: \$400,000 - \$89,000 = \$311,000 Incremental profit: \$11,000 LARCO - Process further. Sell as is: \$400,000 Process further: \$800,000 - \$250,000 = \$550,000 Incremental profit: \$150,000 Ch. 6 – Exercises E6-10 Is Maggie right about eliminating the Erie Division? Prepare a schedule to support your answer. I do not see how eliminating 100,00...
View Full Document

## This note was uploaded on 03/01/2012 for the course ACC all taught by Professor All during the Spring '12 term at University of Phoenix.

### Page1 / 2

Ch 5-6 - variable costs would increase by 35%. Should the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online