examchap5 - Folk Exam Questions Chapter 5 1 An analysis of...

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Folk Exam Questions - Chapter 5 1. An analysis of past janitorial costs indicates that janitorial cost is an average of $0.80 per machine-hour at an activity level of 40,000 machine-hours and $1.00 per machine- hour at an activity level of 32,000 machine-hours. Assuming that this activity is within the relevant range, what is the total expected janitorial cost if the activity level is 37,000 machine-hours? Solution: Using the data provided above, janitorial costs are fixed (rather than variable or mixed) in nature; that is, they total $32,000 at both 40,000 and 32,000 machine hours. Machine Hours Cost per Machine Hour Total Cost 40,000 $0.80 $32,000 32,000 $1.00 $32,000 Accordingly, janitorial costs would be expected to be $32,000 at 37,000 machine hours (or at any other level of machine hours within the relevant range). 2. Shipping expense is $10,000 for 1,000 pounds shipped and $13,750 for 1,500 pounds shipped. Assuming that this activity is within the relevant range, if the company ships 1,250 pounds, what is its expected shipping expense?
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