1590000573500 2 variablecostspercar 10193040min

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Unformatted text preview: 42,000 38,000 72,000 $412,000 $64,000 46,000 $110,000 Some costs are classified as variable because the total costs in these categories change in proportion to the number of cars washed in Lorenzo’s operation. Some costs are classified as fixed because the total costs in these categories do not vary with the number of cars washed. If the conveyor belt moves regardless of the number of cars on it, the electricitycoststopowertheconveyorbeltwouldbeafixedcost.  $412,000 =$5.15percar 80,000 Totalcostsestimatedfor90,000cars=$110,000+($5.15×90,000)=$573,500 2.  Variablecostspercar=   10 ­‑19(30–40min.) Linearcostapproximation.  Differenceincost $529,000 − $400,000 Slopecoefficient(b)  = = = Differenceinlabor ­‑hours 7,000 − 4,000 $43.00   Constant(a) =$529,000–($43.00×7,000)   =$228,000   Costfunction =$228,000+$43.00 × professionallabour ­‑hours   ThelinearcostfunctionisplottedinSolutionExhibit10 ­‑19   No, the constant component of the cost function does not represent the fixed overhead cost of the Calgary Group. The relevant range of professionallabour ­‑hoursisfrom3,000to8,000. Theconstantcomponent provides the best available starting point for a straight line that approxima...
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