Pacific Company produces and sells car brake shoes. It supplies you the following information regarding costs at various levels of monthly production:
Production volume
7 000 units
10 000 units
Accountant’s Classification
Direct materials
$70 000
$100 000
Variable
Direct labour
56 000
80 000
Indirect materials
21 000
30 000
Supervisors’ salaries
12 000
Fixed
Depreciation on plant
10 000
Maintenance
32 000
44 000
Utilities
15 000
Insurance on plant and equipment
1 600
Property taxes on plant
2 000
Total
$219 600
$300 600
Required:
question no 1
The Accountant of the company has limited knowledge about various types of costs and cost behaviour. He has classified the costs into Fixed and Variable as appears in the right-hand column in the above table. Do you agree with the Accountant’s cost classification? Why, or why not? Can you identify each cost as being variable, fixed, or mixed by writing the name of each cost under one of the following headings:
Variable Costs
Fixed Costs
Mixed Costs
question no 2
One of the junior trainee accountant who is a recent Uni. graduate has mentioned that not all costs can be strictly classified into fixed and variable. There may be some costs that are not strictly variable or fixed. They are called mixed costs.
Do you agree with this trainee? If so, how do you split the mixed costs into Fixed and Variable elements and develop an equation for total monthly production costs?
kindly provide me the answer to these two question with explanation without any plagirism and copy paste
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here