Which of these 8 cost categories would be considered variable, and which fixed, and explain why
Quantitative Data to Manage an Organization
July 9, 2020Review of a local restaurant that you could post on Yelp.com
July 9, 2020Which of these 8 cost categories would be considered variable, and which fixed, and explain why
With the help of your CFO, you have put together the following preliminary budget figures based on last year’s numbers for a planned production and sales level of 4,000 units per year:
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Building depreciation |
$200,000/yr. |
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Machine operators |
$100,000/yr. |
|
Management staff |
$400,000/yr. |
|
Direct materials |
$4,000,000/yr. |
|
Other expenses that seem to vary based on production levels |
$3,000,000/yr. |
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Other expenses that don’t seem to vary |
$1,300,000/yr. |
|
Selling price per unit |
$5,000/unit |
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Utilities: This category is difficult to analyze; a part of it is related to the building’s heat and light, whereas a part of it is used in the manufacturing process itself. You have the following data to which you will apply the high-low method:
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You are planning for the future and working on a report based on data from last year’s actual performance. You are going to use the breakeven formula to determine the businesses breakeven point and to answer some important questions regarding your data.
Using only the data from last year’s actual performance write a report answering the following questions:
- Which of these 8 cost categories would be considered variable, and which fixed, and explain why?
- Which costs would be considered mixed (i.e., semi-variable or semi-fixed)?
