Concept introduction:
Variable Cost:
Variable cost is the type of cost that changes with the level of production. Variable costs increase with the increase in the level of production and vice-versa. Although the total Variable cost changes with the level of production but the variable cost per unit remains constant irrespective of the level of production.
To indicate:
The Difference between fixed and variable costs and their examples in case of driving a car
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MANAGERIAL ACCOUNT.(LL)W/ACCESS>CUSTOM<
- 1.Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers. a. What is the estimated variable portion of maintenance costs per labor hour? 2.What is the estimated fixed maintenance cost each month? 3.Formulate the regression equation 4.If it is estimated that 600 labor hours will be used in July, what is the expected total power cost for July? 5.Using the least-squares method of analyzing costs, answer the following questions and show computations to support your answers. a. What is the estimated variable portion of maintenance costs per labor hour? 5a. What is the estimated fixed maintenance cost each month? 5b.Formulate the regression equation 5c.If it is estimated that 600 labor hours will be used in July, what is the expected total power cost for July?arrow_forwardThe Long Haul Trucking Company is developing metrics for its drivers. The company computes variable costs of each load based upon miles driven and allocates fixed costs based upon time consumed. Load costing standards consider safe driving speeds and Department of Transportation regulations on hours of service (the amount of time the driver can be on duty or drive). The most effective metric for driver performance would likely be:a. Contribution per mile driven.b. Gross margin per mile driven.c. Achievement of delivered loads in allowed times.d. Percentage increase in delivered loads below standard.arrow_forwardUse the high-low method to estimate the variable cost per tour mile traveled and the fixed cost per month. Develop a formula to express the cost behavior exhibited by the company’s maintenance cost. Round "Variable cost per tour mile" to 3 decimal places.arrow_forward
- Ruby Company manufactures and sells a single product. The company’s sales and expenses for last year follow in the picture table below Fill in the missing numbers in the preceding table. Use the following questions to help fill in the missing numbers in the table: What is the total contribution margin? What is the total variable expense? How many units were sold? What is the per-unit variable expense? What is the per-unit contribution margin? Answer the following questions about breakeven analysis: What is the breakeven point in units? What is the breakeven point in sales dollars? 3. Answer the following questions about target profit analysis and safety margin: How many units must the company sell in order to earn a profit of $48,000? Go back to the data given in the table. What is the current margin of safety in units? Again, go back to the data in the table. What is the margin of safety in sales dollars? Again, go back to the data in…arrow_forwardAs the owner of the small business, you are tasked to determine the right price for your product before you open your business. In your business, you have a fixed cost of ₱50 000, and the variable cost per unit is ₱100. Using the formula for the break-even point, you must analyze the number of units needed to produce to break-even. You must also observe what will happen to the break-even units as the price approaches zero or infinity.arrow_forwardUsing the least-squares method of analyzing costs, answer the following questions and show computations to support your answers. a. What is the estimated variable portion of maintenance costs per labor hour? B.What is the estimated fixed maintenance cost each month? C.Formulate the regression equation D.If it is estimated that 600 labor hours will be used in July, what is the expected total power cost for July?arrow_forward
- If all costs are fixed except supplies costs which are variable Do my fixed cost total $257,500 and variable cost total $60,000 making variable cost per visit $6? how do I calculate cost per visit?arrow_forwardThe accounting department at the corporate office has provided you with some historical cost data. Economy rentals cost $17.10 per day while luxury vehicles cost $25.12 per day. Regardless of vehicle type, a rental contract requires $8.90 for reconditioning. Additional vehicles can be delivered from the regional hub at a cost of $35/vehicle, on top of the costs above. Do you have any concerns about using this accounting data to set prices? Hint: Consider the difference between average and marginal cost. In addition to answering the questions above, provide pricing recommendations for economy vehicles for the next four weeks.arrow_forwardThe owner of the Moxy Hotel in downtown Washington, DC, offers two room types: “deluxe” and “regular”, the latter of which incurs a variable cost of $50 and generates a contribution margin of 60% for a one-night stay during the workweek. Under the assumption that the variable cost of a deluxe room is the same as that of a regular room, what should the price of a deluxe room during the workweek be so that it is available at least 75% of the time?arrow_forward
- Identifying Fixed, Variable, Mixed, and Step Costs Consider each of the following independent situations: a. A computer service agreement in which a company pays 150 per month and 15 per hour of technical time b. Fuel cost of the companys fleet of motor vehicles c. The cost of beer for a bar d. The cost of computer printers and copiers at your college e. Rent for a dental office f. The salary of a receptionist in a law firm g. The wages of counter help in a fast-food restaurant h. The salaries of dental hygienists in a three-dentist office. One hygienist can take care of 120 cleanings per month. i. Electricity cost which includes a 15 per month billing charge and an additional amount depending on the number of kilowatt-hours used Required: 1. For each situation, describe the cost as one of the following: fixed cost, variable cost, mixed cost, or step cost. (Hint: First, consider what the driver or output measure is. If additional assumptions are necessary to support your cost type decision, be sure to write them down.) Example: Raw materials used in productionVariable cost 2. CONCEPTUAL CONNECTION Change your assumption(s) for each situation so that the cost type changes to a different cost type. List the new cost type and the changed assumption(s) that gave rise to it. Example: Raw materials used in production. Changed assumptionthe materials are difficult to obtain, and a years worth must be contracted for in advance. Now, this is a fixed cost. (This is the case with diamond sales by DeBeers Inc. to its sightholders. See the following website for information: www.keyguide.net/sightholders/.)arrow_forwardPhilippine Island Tours has incurred the following bus maintenance costs during the recent tourist season. Answer the following: Using the high-low method, determine which month is the highest? Using the high-low method, determine which month is the lowest? Using the high-low method, determine the variable cost per tour mile traveled. (Use this format 0..123) Using the high-low method, determine fixed cost per month (Use this format 10,000) Using the high-low method Develop a formula to express the cost behavior exhibited by the company’s maintenance cost. (Use this format Y=2a+10) Using the high-low method, predict the level of maintenance cost that would be incurring during the month of May when 34,000 tour miles are driven. (Use this format 10,000)arrow_forwardRussell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that if he drives 3,270 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,360 miles in a month, his average operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $654 + $0.35 per mile. Required: Determine how many miles Russell needs to drive to break even. Assume Russell drove 1,935 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. Determine how many miles Russell must drive to earn $1,000 in profit. Prepare a contribution margin income statement assuming Russell drove 1,935 miles last month. Use the information provided in Req 4a to calculate Russell’s degree of operating leverage.arrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning