The following cost graphs illustrate various types of cost behavior: For each of the following costs, identify
Question:
The following cost graphs illustrate various types of cost behavior:
For each of the following costs, identify the cost graph that best illustrates its cost behavior as the number of units produced increases.(a) Total direct materials cost(b) Electricity costs of $2,000 per month plus $0.09 per kilowatt-hour(c) Per-unit direct labor cost(d) Salary of quality control supervisor, $10,000 per month(e) Per-unit cost of straight-line depreciation on factory equipment
Cost Graph One Cost Graph Two Total Units Produced Total Units Produced Cost Graph Four Cost Graph Three Total Units Produced Total Units Produced %24 %24 %24 %24
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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