21) The results below represent what form of cost behavior? Year 2 Year 1 4,500
ID: 2331139 • Letter: 2
Question
21) The results below represent what form of cost behavior? Year 2 Year 1 4,500 4,800 Total Cost 11250 12.000 A) Variable Cost B) Opportunity Cost C) Mixed Cost D) Fixed Cost 22) Consider the following information: Unit sold Total salary cost Total cost of goods sold 20 40 60 S6,000 14,000 7,800 s 9.200 42,000 28,000 Depreciation cost per unit 120 60 4 Based on the above information, select the correct statement. A) Salary cost is a mixed cost B) If the company sells 20 units for $540 each, it will incur a loss of $200 C) Cost of goods sold is a mixed cost. D) Depreciation cost is a variable cost. 23) Taste of the Town, Inc. operates a gourmet sandwich shop. The company orders bread cold cuts, and produce several times a week. If the cost of these items remains constant per customer served, the cost is said to be: A) Variable B) Mixed C) Fixed D) Opportunity 24) All of the following would be considered a fixed cost for a bottled water company except: A) Property taxes on its factory building B) Hourly wages for machine operators C) Rent on warehouse facility D) Depreciation on its manufacturing equipment 25) Once sales reach the break-even point, each additional unit sold will: A) increase the company's operating leverage. B) increase profit by an amount equal to the per unit contribution margin. C) reduce the margin of safety D) increase fixed cost by a proportionate amount.Explanation / Answer
21. Since total cost is not constant when the units change from 4500units from 4800units , this cost is not a fixed cost.
Per unit cost at two levels :
Per unit cost in year 1 = $11250 ÷ 4500units = $2.5
Per unit cost in year 2 = $12000 ÷ 4800units = $2.5
Since per unit cost is constant at different level of units , this cost is a variable cost.
22. Salary cost is a mixed cost
23. Its a variable cost. Since bread, cold cuts are goods which may vary from number of goods produced or sold and the cost of them are constant to the people served, so its Variable cost.
24. Hourly wages for machine operators . Wages are paid by how many number of operators have worked, it may vary from time to time as the production changes so it is a varible cost and not fixed cost.
25. Increase profit by an amount equal to the per unit contribution margin. Break even point is said to be point reached where total costs (expenses) are equal to total sales (revenue) and even a point increase in sales will fetch profits.
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