Exercise 11-2 Identifying cost behavior At the various activity levels shown, Am
ID: 2573392 • Letter: E
Question
Exercise 11-2 Identifying cost behavior At the various activity levels shown, Amborse Company incurred the following costs. 100 Units Sold Depreciation cost per unit Total rent cost Total cost of shopping bags Cost per unit of merchandise sold Rental cost per unit of merchandise sold 20 40 60 80 48.00 3,200.00 3,200.00 3,200.00 3,200.00 3,200.00 10.00 90.00 240.00 120.00 80.00 60.00 a. b. c. d. e. 2.00 4.00 6.00 8.00 90.00 90.00 90.00 90.00 f. Total phone expense g. Cost per unit of supplies h. Total insurance cost i. Total salary cost j. Total cost of goods sold 7.20 160.00 1.00 480.00 S1,200.00 $1,600.00 S2,000.00 S2,400.00 $2,800.00 36.00 80.00 1.00 480.00 18.00 100.00 1.00 480.00 12.00 20.00 1.00 480.00 9.00 140.00 1.00 480.00 1,800.00 3,600.00 5,400.00 7,200.00 9,000.0 Required ldentify each of these costs as fixed, variable, or mixedExplanation / Answer
note:
fixed costs are those which do not vary in relation to units sold.
variable costs are those which vary directly in proportion to increase in units sold.
mixed costs are those which increase with increase in units sold but not in same proportion as sales.
the following table shows the required segregation:
Cost item Remarks a.Depreciation cost per unit Variable SInce it is reducing in proportion to increase in number of units, it may be noted that total depreciation is fixed cost, but depreciation per unit is a variable cost b.Total rent cost Fixed SInce it does not change with change in volume c.Total cost of shipping bags variable increases in proportion to increase in sale..i.e sales double from 20 to 40 , expense doubles from 2.00 to 4.00. d.cost per unit of merchandise sold fixed does not change with change in units sold e.rent cost per unit of merchandise sold variable varies in relation to increase in output, but total cost remains the same f.Total phone expense mixed does not increase in proportion to increase in units sold, i.e., sales double from 20 to 40, but expense does not double from 80 to 160, it just jumps to 100. g.cost per unit of supplies fixed does not change with change in output h.Total insurance cost fixed does not change with change in output i.total salary cost mixed does not increase in proportion to increase in units sold, i.e., sales double from 20 to 40, but expense does not double from 1,200 to 2,400, it just jumps to 1,600 total cost of goods sold variable increases directly in proportion to sales...i.e.sales double from20 to 40 cost of goods sold double from 1,800 to 3,600Related Questions
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