SURVEY OF ACCOUNTING 360DAY CONNECT CAR
5th Edition
ISBN: 9781260591811
Author: Edmonds
Publisher: MCG
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Chapter 11, Problem 8E
a)
To determine
Draw a line to show the relationship between total variable cost and the level of activity
b)
To determine
Draw a line to show the relationship between variable cost per unit and the level of activity
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Students have asked these similar questions
What is target cost per unit?
Question content area bottom
Part 1
A.
Target cost per unit is the contribution margin per unit over the average total unit cost.
B.
Target cost per unit is the average total unit cost over the contribution margin ratio.
C.
Target cost per unit is the variable unit cost over the product's life cycle.
D.
Target cost per unit is the average total unit cost over the product's life cycle.
1. Mastery Problem: Contribution Margin, Cost-Volume-Profit Analysis and Break-Even Point (Overview)
Fixed, Variable and Mixed Costs
An appreciation of cost behavior is needed in order for management to understand and predict profitability as the costs of material, labor and other operating expenses and levels of production and sales change. It's important to review the cost behavior of fixed, variable and mixed costs before contribution margins, cost-volume-profit analysis, and break-even points.
1. In the table below, Have-A-Seat Inc. has outlined many of the costs associated with producing office chairs. With respect to the production and sale of office chairs, classify each cost as fixed, mixed, or variable.
a. Pressure-molded plastic for chair frames
b. Pension cost: $0.50 per employee hour on the job
c. Insurance premiums for inventory: $2,100 per month plus $0.01 for each dollar of inventory over $2 million
d. Property taxes: $120,000 per…
15
A fixed cost is a cost which
Group of answer choices
varies inversely in total with changes in the level of activity.
varies in total with changes in the level of activity.
remains constant in total with changes in the level of activity.
remains constant per unit with changes in the level of activity.
Chapter 11 Solutions
SURVEY OF ACCOUNTING 360DAY CONNECT CAR
Ch. 11 - 1.Define fixed cost and variable cost and give an...Ch. 11 - Prob. 2QCh. 11 - 3.Define the term operating leverage and explain...Ch. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - 6.If volume is increasing, would a company benefit...Ch. 11 - Explain the risk and rewards to a company that...Ch. 11 - 9.Are companies with predominately fixed cost...Ch. 11 - 10.How is the relevant range of activity related...Ch. 11 - Which cost structure has the greater risk?...
Ch. 11 - 14.The president of Bright Corporation tells you...Ch. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - Prob. 17QCh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Exercise 2-4A Determining total variable cost The...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 - Prob. 9ECh. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prepare an income statement using the contribution...Ch. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Problem 2-19A Context-sensitive nature of cost...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Prob. 27PCh. 11 - Prob. 28PCh. 11 - Prob. 29PCh. 11 - Prob. 1ATCCh. 11 - Prob. 2ATCCh. 11 - Prob. 3ATCCh. 11 - Prob. 4ATCCh. 11 - Prob. 5ATC
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- Examine the graphs in Exercise 3-40. Required: As explained in the chapter, cost behavior patterns can be described as fixed, variable, semi-variable, mixed, or step function (i.e., semi-fixed) in nature. Explain the exact type of cost behavior pattern represented by each of the cost curves shown in graphs A through L. Note that some of the graphs might represent a combination of multiple cost behavior patterns.arrow_forwardQuestion 4) “When the number of units in work in process and finished goods inventories increase, absorption costing net operating income will typically be greater than variable costing net operating income.” Do you agree? Explain briefly.arrow_forwardANSWER ALL THE GIVEN ITEMS. Write “True” if the statement is true and write “False” if the statement is false. 2. A variable cost will change in total in proportion to changes in the level of activity.3. A fixed cost is constant per unit of product.4. Cost accumulation, cost allocation, and cost objects are interrelated.5. A variable cost remains constant per unit, though in total increases as activity levels increase.6. If volume increases, both total variables and total fixed costs will increase.7. Decrease in the level of activity will cause total variable and total fixed costs to decrease.8. When graphed, total variable costs and total fixed costs are both assumed to be linear withinthe relevant range.9. Fixed cost is constant in total amount regardless of changes in activity level within the relevantrange.10. Cost function is an express that mathematically links costs, their behavior, and their cost driver.11. As volume decreases within the relevant range, variable cost per unit…arrow_forward
- 4) Design ABC system for EON and Brothers (discuss steps) 5) What are the Costs per unit of Alfa and Beta under traditional and ABC costing systems?What would be the prices of Alpha and Beta traditional and ABC costing systems? Comparethe costs and prices calculated in the two systems (Calculations should be shown in theappendix) and for analysis 6) Discuss your recommendation on the viability of ABC for EON and Brothers Ltd., given thefinancial director's concerns.arrow_forwardRequired: 1. Prepare a contribution format income statement. 2. Prepare a traditional format income statement. 3. Calculate the selling price per unit. 4. Calculate the variable cost per unit. 5. Calculate the contribution margin per unit. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in responses to changes in unit sales?arrow_forwardQuestion 5 What is the main difference between absorption costing and variable costing system. How does production and sales have impact on the variation of income in absorption costing and variable costing system.arrow_forward
- 41.A cost driver a. causes fixed costs to rise because of production changes. b. has a direct cause-effect relationship to a cost. c. can predict the cost behavior of a variable, but not a fixed, cost. d. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.arrow_forward1.) Explain the effects of an increase in the volume of activity on the following costs. (Assume volume remains within the relevant range .) a. Total variable costs. b. Variable cost per unit. Total fixed cpst . d. Fixed cost per unit. e. Total semi variable costs. f. Semi variable cost per unit .arrow_forwardSECTION BQUESTION 1 “Costing systems attempt to explain how products consume resources but do not indicate the joint benefits of having multiple products.”Required: Citing examples of at least two costing systems, a. Explain the statement above. b. Explain how the addition of a new product to the product range may affect the cost of existing products. c. Outline the consequences, in terms of profitability, of decision to increase/decrease the product range. d. Identify six costing systems.arrow_forward
- QUESTION 15 The best objective when faced with limited resources is to maximize: production of the product with the highest selling price. production of the product with the highest customer demand. the contribution margin per unit of the constraining resource. the gross profit per unit of the constraining resource.arrow_forwardCh. 5 Fixed Costs/Per Unit Pleaes explain the following concept/rule and give an example: Why do fixed costs on a per unit bases decrease with an increase in activity level? Also what is the difference between a fixed cost and a per-unit fixed cost?arrow_forward1. determine the variable cost per unit. 2. how much is the total fixed cost? 3. using the data compute for the total variable under period 6. 4. using the data, compute for the total fixed costs under period 1. 5. using the data, compute for the fixed cost per unit under period 7arrow_forward
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