Discussion Question 4-1: A leading management accounting textbook (Cost
Accounting: A Managerial Emphasis, by Horngren, Datar and Foster,
12th edition) provides the following table (Exhibit 2-5 in that textbook)
providing examples of cost classifications:
Employment opportunities in accounting
During the last half-century, accounting has gained the
same professional status as the medical and legal
professions. Today, the accountants in the United States
number well over a million. In addition, several mill
If, within a relevant range, a cost is neither fixed nor
variable, it is called semi-variable or mixed.
Following are two common examples of mixed costs.
In this example, although the total cost line increases
in production, it does not pass
Fixed costs do not vary with the production level.
Total fixed costs remain the same, within
the relevant range. However, the fixed cost per unit
decreases as production increases, because the same
fixed costs are spread over more units. The
Variable costs vary in a linear fashion with the
production level. However, when stated on a per unit
basis, variable costs remain constant across all
production levels within the relevant range. The
following two charts depict this relati
4-8: Turquoise Company manufactures widgets and
other good stuff. When 12,000 widgets are produced,
the total cost per widget is $40, calculated as follows:
Labor (another variable
Variable overhead (yet
4-3: Describe each of the following costs as either fixed, variable, or semivariable (i.e., mixed)
The cost is $500 per unit at a production level of 50 units, and $500 per unit at a
production level of 100 units.
The cost is $500 in total at a prod
4-6: Identify the following cost as either fixed,
variable or mixed (semi-variable). The horizontal
axis refers to the number of units produced. The
vertical axis refers to the total cost incurred for all of
the units produced.
4-7: Identify the following