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Unformatted text preview: Chapter 6 Cost Behavior Τ Chapter Review Quiz Answers: 1. b 3. d 5. c 7. d 9. a 2. a 4. d 6. b 8. c 10. c Τ Short Exercises (510 min.) S 61 a. Depreciation on equipment used to cut wood enclosures…………………………………………… Fixed b. Wood for speaker enclosures………………………. Variable c. Patents on crossover relays………………………… Fixed d. Crossover relays………………………………………. Variable e. Grill cloth……………………………………………….. Variable f. Glue……………………………………………………… Variable g. Quality inspector’s salary……………………………. Fixed Chapter 6 Cost Behavior 97 (10 min.) S 62 Managerial Accounting ClassTest Edition On each of the following graphs, the yaxis is “Total Cost” and the xaxis is “Volume of Activity” a. Step b. Fixed c. Curvilinear e. Variable d. Mixed (Any curved line) Y X Y X Y Y Y X X X 98 (510 min.) S 63 Total fixed cost = $3.00 / basketball × 12,000 basketballs Total fixed cost = $36,000 Since a volume of 15,000 basketballs is in the same relevant range, the total fixed costs will remain constant at $36,000 Therefore, the new fixed cost per basketball will be: Fixed cost per basketball = Total fixed cost Number of basketballs produced Fixed cost per basketball = $36,000 15,000 Fixed cost per basketball = $2.40 Chapter 6 Cost Behavior Total Fixed Cost 12,000 15,000 $36,000 99 Number of Basketballs produced (510 min.) S 64 a. Fixed y = f Where y = total fixed cost f = fixed amount over a period of time (vertical intercept) b. Mixed y = vx + f Where y = total mixed cost v = variable cost per unit of activity (slope) x = volume of activity f = fixed amount over a period of time (vertical intercept) c. Variable y = vx Where y = total variable cost v = variable cost per unit of activity (slope) x = volume of activity Managerial Accounting ClassTest Edition 100 (510 min.) S 65 Cost A is a variable cost. The cost is constant on a per unit basis and increases in total as volume increases. Cost B is a fixed cost. The cost is constant in total, and decreases on a per unit basis as volume increases. Cost C is mixed. It is not constant in total, and it is not constant on a per unit basis. Chapter 6 Cost Behavior 101 (510 min.) S 66 Req. 1 a. Call for 20 minutes $5.00 + (20 × $0.35) $5.00 + $7.00 = $12.00 b. Call for 40 minutes $5.00 + (40 × $0.35) $5.00 + $14.00 = $19.00 c. Call for 80 minutes $5.00 + (80 × $0.35) $5.00 + $28.00 = $33.00 Req. 2 Managerial Accounting ClassTest Edition 102 (510 min.) S 67 Find the answer to Ritter Razor’s questions by 1) finding the company’s cost equation, and then 2) using the cost equation to predict total costs at a different volume....
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This note was uploaded on 04/08/2008 for the course ACCT 1302 taught by Professor Venkateswar during the Spring '08 term at Trinity U.
 Spring '08
 Venkateswar
 Managerial Accounting, Depreciation

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