APPLY THE CONCEPTS: Determine the total variable cost Costs that change in direct proportion to the number of units produced or the amount of services provided are known as "variable costs." Variable costs are directly tied to activity bases and generally take the form of either direct labor or direct materials. A manufacturing company makes widgets with direct materials cost in the amount of $5 per unit. Because all production is done by robots, there are no labor costs directly associated with the production of widgets. To illustrate, assume that the manager wants to know total variable cost if 450 units were produced: Variable Cost per Unit x Units Produced = Total Variable Cost $_ x 450 units = $ Calculate total direct materials cost at different levels along the relevant range of 100-500 units. If your answer is zero, enter "0". Number of Units Produced Total Direct Materials Cost 0 units $ 100 $ 200 $ 300 $ 400 $ 500 $ B. Characteristics of Variable Costs 1. Variable cost per unit __ with the activity base across the relevant range. a. Changes b. does not change 2. Total variable cost with the activity base across the relevant range. a. Changes b. does not change C. Based on the completed table above, select the graph that correctly represents the data. (4 graph options in screenshot)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A. APPLY THE CONCEPTS: Determine the total variable cost

Costs that change in direct proportion to the number of units produced or the amount of services provided are known as "variable costs." Variable costs are directly tied to activity bases and generally take the form of either direct labor or direct materials.

A manufacturing company makes widgets with direct materials cost in the amount of $5 per unit. Because all production is done by robots, there are no labor costs directly associated with the production of widgets.

To illustrate, assume that the manager wants to know total variable cost if 450 units were produced:

Variable Cost per Unit

Units Produced

Total Variable Cost

$_______

450 units

$________

Calculate total direct materials cost at different levels along the relevant range of 100-500 units. If your answer is zero, enter "0".

Number of Units Produced	Total Direct Materials Cost
0 units	$______________
100	$______________
200	$______________
300	$______________
400	$______________
500	$______________

B. Characteristics of Variable Costs

1. Variable cost per unit ________ with the activity base across the relevant range.

a. Changes

b. does not change

2. Total variable cost with the activity base across the relevant range.

a. Changes

b. does not change

C. Based on the completed table above, select the graph that correctly represents the data. (4 graph options in screenshot)

Based on the completed table above, select the graph that correctly represents the data.
3500
3000
2500
2000
1500
а.
1000
500
100
200
300
400
500
600
700
Number of Units Produced
6000
5000
4000
3000
b.
2000
1000
100
200
300
400
500
600
700
Number of Units Produced
Total Direct Materials Cost
Total Direct Materials Cost

Number of Units Produced
7000
6000
5000
4000
3000
C.
2000
1000
100
200
300
400
500
600
700
Number of Units Produced
7000
6000
5000
4000
3000
d.
2000
1000
100
200
300
400
500
600
700
Number of Units Produced
Total Direct Materials Cost
Total Direct Materials Cost

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