BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

Solutions

Chapter
Section
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
1 views

Use the following information for Exercises 3-42 and 3-43:

Ben Palman owns an art gallery. He accepts paintings and sculpture on consignment and then receives 20% of the price of each piece as his fee. Space is limited, and there are costs involved, so Ben is careful about accepting artists. When he does accept one, he arranges for an opening show (usually for 3 hours on a weekend night) and sends out invitations to his customer list. At the opening, he serves wine, soft drinks, and appetizers to create a comfortable environment for prospective customers to view the new works and to chat with the artist. On average, each opening costs $500. Ben has given as many as 20 opening shows in a year. The total cost of running the gallery, including rent, furniture and fixtures, utilities, and a part-time assistant, amounts to $80,000 per year.

Exercises 3-42 Mixed Costs

Refer to the information for Ben Palman’s art gallery above.

Required:

  1. 1. Prepare a graph that illustrates the relationship between the cost of giving opening shows and the number of opening shows given. (Let cost be the vertical axis and number of opening shows be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a mixed cost?
  2. 2. Prepare a graph that illustrates the relationship between the cost of running the gallery and the number of opening shows given. (Let cost be the vertical axis and number of opening shows be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a mixed cost?
  3. 3. Prepare a graph that illustrates the relationship between Ben’s total costs (the sum of the costs of giving opening shows and running the gallery) and the number of opening shows given. (Let total cost be the vertical axis and number of opening shows given the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a mixed cost?

1.

To determine

Construct the graph that explains the relationship between the cost of giving opening hours and the number of opening shows given. Also, identify this type of cost as a variable cost, a fixed cost, or mixed cost.

Explanation

Cost:

Cost can be defined as the cash and cash equivalent which is incurred against the products or its related services which will benefit the organization in the future. There are two types of costs that are fixed and variable costs.

The graphical representation of cost of giving opening hours and the number of opening shows given:

2.

To determine

Construct the graph that explains the relationship between the cost of running the gallery and the number of opening shows given. Also, identify this type of cost as a variable cost, a fixed cost, or mixed cost.

3.

To determine

Construct the graph that explains the relationship between the total cost of BE and the number of opening cost given. Also, identify this type of cost as a variable cost, a fixed cost, or mixed cost.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

RECAPITALIZATION Currently, Bloom Flowers Inc. has a capital structure consisting of 20% debt and 80% equity. B...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)