Exercises: Set A 27. Identifying Cost Behavior. Mining, Inc., is trying to identify the cost behavior of the three costs shown. Cost information is provided for six months. Cost 1 Cost 2 Cost 3 Units Total Cost per Total Cost per Total Cost per Month Produced Costs Unit Costs Unit Costs Unit 1 8,000 $10,000 $24,000 $32,000 2 10,000 10,000 29,000 40,000 3 12,000 10,000 33,600 48,000 4 14,000 10,000 36,400 56,000 5 16,000 10,000 38,400 64,000 6 18,000 10,000 39,600 72,000 Required: a. Calculate the cost per unit, and then identify how the cost behaves (fixed, variable, or mixed) for each of the three costs. Explain the reasoning behind your answers. b. Why is it important to identify how costs behave with changes in activity?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Exercises: Set A
27. Identifying Cost Behavior. Mining, Inc., is trying to identify the cost behavior of the three
costs shown. Cost information is provided for six months.
Cost 1
Cost 2
Cost 3
Units
Total
Cost per
Total
Cost per
Total
Cost per
Month
Produced
Costs
Unit
Costs
Unit
Costs
Unit
1
8,000
$10,000
$24,000
$32,000
2
10,000
10,000
29,000
40,000
3
12,000
10,000
33,600
48,000
4
14,000
10,000
36,400
56,000
5
16,000
10,000
38,400
64,000
6
18,000
10,000
39,600
72,000
Required:
a. Calculate the cost per unit, and then identify how the cost behaves (fixed, variable, or
mixed) for each of the three costs. Explain the reasoning behind your answers.
b. Why is it important to identify how costs behave with changes in activity?
Transcribed Image Text:Exercises: Set A 27. Identifying Cost Behavior. Mining, Inc., is trying to identify the cost behavior of the three costs shown. Cost information is provided for six months. Cost 1 Cost 2 Cost 3 Units Total Cost per Total Cost per Total Cost per Month Produced Costs Unit Costs Unit Costs Unit 1 8,000 $10,000 $24,000 $32,000 2 10,000 10,000 29,000 40,000 3 12,000 10,000 33,600 48,000 4 14,000 10,000 36,400 56,000 5 16,000 10,000 38,400 64,000 6 18,000 10,000 39,600 72,000 Required: a. Calculate the cost per unit, and then identify how the cost behaves (fixed, variable, or mixed) for each of the three costs. Explain the reasoning behind your answers. b. Why is it important to identify how costs behave with changes in activity?
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