The following is an extract of a cost report for Best Car Wash for the six months from Jun to Nov. Management considers the activities in these six months as within the relevant range for the purpose of cost MonthNumber of cars washed Carwashing labour Costs ($)Jun5007,000Jul5207,200Aug4806,800Sep5107,100Oct4006,000Nov6008,000 Based on the above data, determine the cost behaviour of the car washing labour cost. Justify your answer. 2. Quality Press Ltd produces a number of products, including a weekly newspaper called The Quality Times, customised business cards and printed stationery. In preparing next year’s budget, the accountant is analysing the behaviour of the company’s major costs, listed below, and considering possible cost The cost of paper used in the Quality Times. Each edition comprises 40 pagesThe cost of the card used for businessThe cost of the lease on the company The cost of setting up the printingThe cost of leasing and running the trucks that deliver the Quality Times to wholesale customers each week. Business cards and printed stationery are picked up byThe cost of the graphic artist who designs customers’ business This person is not an employee and is paid a set amount per card design. The cost of an external marketing consultant who obtains advertising for the Quality Times. This person is paid a percentage of advertising Required:Classify each of the above costs as fixed, variable or semi variable, and indicate an appropriate cost driver, where applicable.

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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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The following is an extract of a cost report for Best Car Wash for the six months from Jun to Nov. Management considers the activities in these six months as within the relevant range for the purpose of cost

Month	Number of cars washed	Carwashing labour Costs ($)
Jun	500	7,000
Jul	520	7,200
Aug	480	6,800
Sep	510	7,100
Oct	400	6,000
Nov	600	8,000

Based on the above data, determine the cost behaviour of the car washing labour cost. Justify your answer.

2. Quality Press Ltd produces a number of products, including a weekly newspaper called The Quality Times, customised business cards and printed stationery. In preparing next year’s budget, the accountant is analysing the behaviour of the company’s major costs, listed below, and considering possible cost

The cost of paper used in the Quality Times. Each edition comprises 40 pages
The cost of the card used for business
The cost of the lease on the company
The cost of setting up the printing
The cost of leasing and running the trucks that deliver the Quality Times to wholesale customers each week. Business cards and printed stationery are picked up by
The cost of the graphic artist who designs customers’ business This person is not an employee and is paid a set amount per card design.

The cost of an external marketing consultant who obtains advertising for the Quality Times. This person is paid a percentage of advertising

Required:

Classify each of the above costs as fixed, variable or semi variable, and indicate an appropriate cost driver, where applicable.

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