Demonstration_Problems_for_Chapter_2

Demonstration_Proble - Demonstration Problems for Chapter 2 Demonstration Problem 2-1 Applying Cost Behavior Concepts to Business Decisions Art On

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Demonstration Problems for Chapter 2 Demonstration Problem 2-1 Applying Cost Behavior Concepts to Business Decisions Art On Tour, Inc. (AOTI) contracts with artists to exhibit their works to the public. AOTI has agreed to pay a well known artist a $20,000 commission for the right to exhibit his work for one month. Required Part a – Identifying Cost Behavior 1. Determine the total commission cost and the commission cost per person if 1,000 / 2,000 / 4,000 people attend the exhibition. Is the commission cost fixed or variable? Fixed People attending 1,000 2,000 4,000 Total Cost 20,000 20,000 20,000 Per Person 20 10 5 2. AOTI provides patrons with books illustrating the artist’s work. The books cost $5 each. Determine the total cost of books and the cost per person if 1,000 / 2,000 / 4,000 people attend the exhibition. Is the book cost fixed or variable? Variable People attending 1,000 2,000 4,000 Total Cost 5,000 10,000 20,000 Per Person 5 5 5 Part b – Operating Leverage and Risk/Reward Relationship 1. AOTI pays an artist a $20,000 commission.
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This note was uploaded on 04/07/2008 for the course ACCT 202 taught by Professor Wessels during the Spring '06 term at Clemson.

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Demonstration_Proble - Demonstration Problems for Chapter 2 Demonstration Problem 2-1 Applying Cost Behavior Concepts to Business Decisions Art On

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