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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. 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. 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. 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?

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

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

Solutions

Chapter
Section
Chapter 3, Problem 42E
Textbook Problem

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?

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Managerial Accounting: The Cornerstone of Business Decision-Making
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