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 year for the factory building and land 2. Variable costs per unit _ (increase, decrrease or stay the same) with changes in the level of activity, while fixed costs per unit _ (increase, decrrease or stay the same) as the number of units increases and _____ (increase, decrrease or stay the same) as the number of units decreases.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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 year for the factory building and land

2. Variable costs per unit _________ (increase, decrrease or stay the same) with changes in the level of activity, while fixed costs per unit _______________ (increase, decrrease or stay the same) as the number of units increases and ___________ (increase, decrrease or stay the same) as the number of units decreases.

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