The following graphs represent various cost behavior patterns. The vertical axis represents costs and the horizontal axis
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Question:
- The following graphs represent various cost behavior patterns. The vertical axis represents costs and the horizontal axis represents the level of activity.
- Required:
- For each of the following situations, identify which graph illustrates the cost behavior pattern involved. Any graph can be used more than once.
- Data usage charges on a smartphone plan – there is a flat rate for the 2 GB plus a variable fee of $10 per MB for any data usage that exceeds the 2 GB.
- Wages for the software developers who all earn a fixed monthly salary.
- Provincial government fees to obtain licenses for dog sled tours. There is a $10 fee for the first 1,000 tours, with no additional fees for any tours that exceed 1,000.
- Cost of raw materials, where the cost starts at $7.50 per unit and then decreases by $0.05 per unit for each of the first 100 units purchased, after which it remains constant at $2.50 per unit.
- Cost of a monthly high-speed internet plan, where $50 is charged for the first 25 GB of usage, $75 for 25.1GB-50GB usage, $100 for 50.1GB-75GB usage, and $125 for 75.1GB+.
- Wage expenses for tree planters who earn a rate of $0.10 per tree planted.
- Rent of a factory building donated by the government where the agreement calls for $100,000 less $1 for each direct labor hour worked in excess of 200,000 hours, but a minimum rental payment of $20,000 must be paid.
- Wages paid to sales staff who receive a fixed salary per month and sales commissions equal to 5% of sales for every sales dollar they generate above $250,000. No additional commissions are paid for sales above $1,000,000.
- Raw materials costs, where the first 1,000 units cost $1 per unit, with the unit cost dropping to $0.80 per unit for quantities above 1,000.
- How would knowledge of cost behaviour patterns such as those above help managers analyze the cost structure of his/her company?
Related Book For
Chemistry The Central Science
ISBN: 978-0321696724
12th edition
Authors: Theodore Brown, Eugene LeMay, Bruce Bursten, Catherine Murphy, Patrick Woodward
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