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Managerial Accounting: The Corners...

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

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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In the cost formula, the term “Total Cost”

  1. a. is the variable rate.
  2. b. is the intercept.
  3. c. is the dependent variable.
  4. d. is the independent variable.
  5. e. cannot be determined from the above formula.

Use the following information for Multiple-Choice Questions 3-4 through 3-7:

The following cost formula was developed by using monthly data for a hospital.

Total Cost = $128,000,000 + ($12,000 × Number of Patient Days)

To determine

Identify “Total Cost” in the given cost formula.

Explanation

Total Cost:

Cost can be defined as the cash and cash equivalent which is incurred by the organization to produce products or its related services which will benefit the organization in the future. In other words, on the basis of nature, total cost comprises fixed and variable cost.

c.

In the given cost formula, total cost is a dependent variable, the value of which is dependent on the average number of patient days in the hospital. If the number of day’s patient admitted increases then the cost also increases...

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