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Following is a list of costs for a furniture manufacturer that specializes in wood tables. Classify each cost as variable, fixed, or mixed relative to the number of tables produced and sold.

1. Wood used to build tables

2. Depreciation on saws and other manufacturing equipment

3. Compensation for sales representatives paid on a salary plus commission basis

4. Supervisor’s salary

5. Wages of production workers

Short Answer

Expert verified
  1. variable cost
  2. Fixed cost
  3. Mixed cost
  4. Fixed cost
  5. Variable cost

Step by step solution

01

Meaning of variable, fixed, and mixed cost

The cost that consistent persistently per unit is known as a variable cost and the cost that remains consistent in total is known as a fixed cost. A cost that is fixed to an extent and variable above that is known as mixed cost.

02

Classification of cost

S. No.

Costs

Type of cost

1

Wood used to build tables

Variable

2

Depreciation on saws and other manufacturing equipment

Fixed

3

Compensation for sales representatives paid on a salary plus commission basis

Mixed

4

Supervisor’s salary

Fixed

5

Wages of production workers

Variable

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Most popular questions from this chapter

What is cost stickiness? Why do managers need to be aware of cost stickiness?

England Productions performs London shows. The average show sells 1,300 tickets at\(60 per ticket. There are 175 shows per year. No additional shows can be held as thetheater is also used by other production companies. The average show has a cast of65, each earning a net average of \)340 per show. The cast is paid after each show. Theother variable cost is a program-printing cost of \(8 per guest. Annual fixed costs total\)728,000.

Requirements

1. Compute revenue and variable costs for each show.

2. Use the equation approach to compute the number of shows England Productionsmust perform each year to break even.

3. Use the contribution margin ratio approach to compute the number of showsneeded each year to earn a profit of $5,687,500. Is this profit goal realistic? Giveyour reasoning.

4. Prepare England Productions’s contribution margin income statement for175 shows performed in 2018. Report only two categories of costs: variableand fixed.

Use the following information to complete Short Exercises S20-10 through S20-15.

Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at \(70 per person as a one-day entrance fee. Variable costs are \)42 per person, and fixed costs are \(170,800 per month.

Refer to the original information (ignoring the changes considered in Short Exercise S20-12). Suppose Funday Park increases fixed costs from \)170,800 per month to $231,000 per month. Compute the new breakeven point in tickets and in sales dollars.

Use the following information to complete Short Exercises S20-16 and S20-17.

Wild Waters Swim Park sells individual and family tickets. With a ticket, each person receives a meal, three beverages, and unlimited use of the swimming pools. Wild Waters has the following ticket prices and variable costs for 2018:

Individual Family Sales price per ticket \( 50 \) 150 Variable cost per ticket 35 140

Wild Waters expects to sell one individual ticket for every four family tickets. Wild Waters’s total fixed costs are $27,500.

S20-16 Calculating breakeven point for two products

Using the Wild Waters Swim Park information presented, do the following tasks.

Requirements

1. Compute the weighted-average contribution margin per ticket.

2. Calculate the total number of tickets Wild Waters must sell to break even.

3. Calculate the number of individual tickets and the number of family tickets the company must sell to break even.

What is cost stickiness? Why do managers need to be aware of cost stickiness?

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