# 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 electricitycoststopowertheconveyorbeltwouldbeafixedcost.  \$412,000 =\$5.15percar 80,000 Totalcostsestimatedfor90,000cars=\$110,000+(\$5.15×90,000)=\$573,500 2.  Variablecostspercar=   10 ­‑19(30–40min.) Linearcostapproximation.  Differenceincost \$529,000 − \$400,000 Slopecoefficient(b)  = = = Differenceinlabor ­‑hours 7,000 − 4,000 \$43.00   Constant(a) =\$529,000–(\$43.00×7,000)   =\$228,000   Costfunction =\$228,000+\$43.00 × professionallabour ­‑hours   ThelinearcostfunctionisplottedinSolutionExhibit10 ­‑19   No, the constant component of the cost function does not represent the fixed overhead cost of the Calgary Group. The relevant range of professionallabour ­‑hoursisfrom3,000to8,000. Theconstantcomponent provides the best available starting point for a straight line that approxima...
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