9. How do variable costs and fixed costs differ? Give an example of each. 10. An
ID: 2457597 • Letter: 9
Question
9. How do variable costs and fixed costs differ? Give
an example of each.
10. Analyze your personal expenses on a variable and
fixed basis. What are some of your personal fixed
costs and variable costs? What would cause them
to change?
11. What is C-V-P analysis used for? In the process of
using C-V-P analysis, what does it mean to “breakeven”?
16. What is the difference between a direct cost and an
indirect cost? Give an example of each in the context
of teaching an accounting class at your school
18. How can out-of-pocket costs and opportunity costs
be applied to your personal financial decisions?
Explanation / Answer
9. Variable costs are costs that vary with the amount of output.Ifmore units are produced, total variable costs increases and viceversa. Example Direct materials, wages etc. Fixed costs are costs that are fixed in a relevant range. They donot vary with the amount of output. Example - rent paid,depreciation, salary expense etc. 10. Personal variable costs - Gasoline use in the car, Foodconsumption, entertainment expenses Personal fixed cost - Rentpayment , car lease payment etc. Personable variable cost vary with the amount of the unitspersonally consumed. Personal fixed cost would remain the same and would vary if movedto a better apartment or changed the lease option to a latest modelcar. 11.C-V-P analysis (cost volume profit analysis) CVP analysis is used to determine the level ofoutput to reach a target profit determined by the business or canbe used to find the impact of costs and prices in the basicbusiness activities. Break - even is a point where total revenue is equal to total costsfor any business. ( sales - variable costs - fixed costs = zero ) 16. Direct costs are costs that are directly related to a productand is measurable and allocated to that particular product. Example- Wood used to make a chair or table or a cabinet. Indirect costs are costs that are related to the product , but arenot measurable to that particular product. Example - number ofscrews used for a lot of cabinets or the amount of paint used topaint one cabinet. 18. An oppurtunity cost is the cost or benefit given up as a resultof chosing another option. Example - giving up your job to go back to school. But , an out-of -pocket cost is a real cash expense ( cannot be abenefit foregone). Example - money paid for college or booksbought.
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