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Accounting 220 Chapter 6- Part 1
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Terms in this set (13)
Variable Cost per Garment
Total Variable Costs/ Volume
Total Fixed Costs
Fixed Cost per garment x Volume
Total Predicted Costs
Avg. Cost Per Garment x Volume
Variable Cost (Slope)
Change in cost/ Change in Volume
Fixed Cost
Total Operating Cost-Total Variable Cost
Total Operating Cost
Fixed + Variable Costs
Total Variable Cost
Variable Cost Per Unit x Units (Machine Hours)
Total Fixed Costs
Total Operating Cost - Total Variable Cost
PROBLEM 1 )
FIXED COST of utilities each month:
1. Take variable cost per unit and multiply by machine hours to get the total variable costs ( for month with highest)
2. Then take that number and subtract it from the total operating cost (for month with highest )
PROBLEM 2)
If Jackson Company uses 1270 machine hours within a month, what will its total costs be?
1. Take the variable cost per unit and multiply by the "if" machine hours
2. add to total fixed cost calculated on problem before
PROBLEM 3)
If $21,488 of the total costs are fixed, what is the variable cost of producing each mailbox?
1. Calculate the variable cost per unit first, by :
Total Costs - Total Fixed Costs = total variable costs
2. Then take that number and divide it by the number of units to get a variable cost per unit
Total Variable costs/NUmber of units = Variable cost per unit
PROBLEM 3)
Write Carrier Malibox's Cost Equation
- Use Mixed Cost equation
y= $ __ x + $__
y= total cost
x= activity volume (in units)
first blank = Variable cost per unit
second blank = fixed period costs
PROBLEM 3)
Plant manager's forecast will be ____ too high if use average cost per unit to predict costs. The average cost per unit is based on a mixed cost that will change as volume changes. IF the manager uses this method, he/she is erroneously assuming that the average cost per unit does not change at different volumes. The manager should use the cost equation to predict costs since it correctly takes into account the variable and fixed components of producing mailboxes
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