Concept introduction:
Variable Cost:
Variable cost is the type of cost that changes with the level of production. Variable costs increase with the increase in the level of production and vice-versa. Although the total Variable cost changes with the level of production but the variable cost per unit remains constant irrespective of the level of production.
To indicate:
The Difference between fixed and variable costs and their examples in case of driving a car
Want to see the full answer?
Check out a sample textbook solutionChapter 1 Solutions
Managerial Accounting
- 1. Verna Salsbury telis you that she thinks the terms foxed cost and variable cost are confusing. She notes that fued cost per unit changes when the number of units changes. Furthermore, variable cost per unit remains fuxed regardless of how many units are produced. She concludes that the terminology seems to be backward. Explain why her explanation appears to be incorrect. 2. Define foxed cost and variable cost and give an example of each.arrow_forwardQuestion 1:Verna Salsbury tells you that she thinks the terms fixed cost and variable cost are confusing. She notes that fixed cost per unit changes when the number of units changes. Furthermore, variable cost per unit remains fixed regardless of how many units are produced. She concludes that the terminology seems to be backward. Explain why her explanation appears to be incorrect.arrow_forwardConsider McDonald’s for a moment and list an example of each of the following costs that would be incurred by a McDonald’s restaurant: (a) a fixed cost, (b) variable cost, and (c) mixed cost. Please be specific and explain why each is a good fit in that category. (Note: For the variable cost on your list, please identify the activity base (driver))arrow_forward
- On the CVP graph, the next unit sold will increase total cost by an amount equal to the Select one: a. Contribution margin ratio b. Selling price per unit c. Selling price per unit minus the variable costs per unit d. Difference between contribution margin and fixed costs e. Variable costs per unitarrow_forwardI need help solving this question. Thankyou so much!arrow_forwardI am attaching two pictures, one is the contribution margin analysis and the other is the break-even analysis. For the contribution margin analysis, select a price for each service. Determine the variable cost from the variable fixed (information provided below) for each service and calculate the contribution margin for each service based on your sales price and the variable cost for that service. For the break-even analysis, determine the fixed from the variable fixed (information provided below) designation is provided, calculate the break-even units (round up) for each service, calculate the break-even units (round up) for suggested target profile levels for each service. Variable fixed Information (use this to fill out the following information in the two pictures) GROOMING (based on 5 grooms per day) Shampoo - $1.04 Clippers - $1.37 Bowls - $0.72 Towels - $5.83 Scissors - $1.01 Total Variable costs - $9.97 Groomer - $2,080.00 Rent - $30.95 Loan - $20.00 Utilities and…arrow_forward
- its cost accounting question Please answerarrow_forwardPlease help me with all answers thankuarrow_forwardPlease explain thoroughly the statement below. (True/false), how and why? "When expressed on a per-unit basis, fixed costs can mislead decision-makers into thinking of them as variable costs." Here is my explanation on the statement above (is it true?): Because the fixed cost per unit varies and variable cost per unit is constant. Therefore, users can think of the fixed cost as a variable cost.arrow_forward
- Need help solving this, please.arrow_forwardWhich of the following cost behavior assumptions is true? (You may select morethan one answer.)a. Variable costs are constant if expressed on a per unit basis.b. Total variable costs increase as the level of activity increases.c. The average fixed cost per unit increases as the level of activity increases.d. Total fixed costs decrease as the level of activity decreasesarrow_forwardAssume that the situation can be expressed as a linear cost function. Find the cost function in this case. Marginal cost: $60; 120 items cost $8000 to produce. The linear cost function is C(x)= FEEarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education