Question

PROBLEMS P4-1 L01 Variable and fixed cost pattern analysis The cost behavior patterns below are lettered A through H. The vertical axes of the graphs represent total dollars of expense, and the horizontal axes represent production in units, machine hours, or direct labor hours. In each case, the zero point is at the intersec- tion of the two axes. Each graph may be used no more than once,

Answer 1

Graph Ams:- a) Depreciation of equipment - the amount of depreciation bese charged is computed based on the no. of machine hours that the equipment was operated T T- Total dollars of expense P- Production in units. (GU b) Electricity bill - flat fixed charge, plus a variable cost after a certain number of kilowatt hours are used >Р c) City water bill- computed as follows: First 1,000,000 gallons or less............$1000 flat free Next 10,000 gallons ..................... 0.003 per gallon used Next 10,000 gallons .................0.006 per gallbon used Next 10,000 gallons ................ 0,009 per gallonused d) Depriciation of equipment - the amount is computed by the straight line method. o a P

Graphs e) Rent on a factory building donated by the city - Ta the agreement calls for a fixed fee payment, un- less 200 poo hours are worked, in which case no rent need be paid. labour 6 T1 Salaries of repair workers - one repair worker is needed for every 1000 machine hours or less (i.e, o to 1,000 hours requires one repair hour coorker, 1,001 to 2,000 hours requires two repair workers, ..etc) ge

a) Graph- G

b) Graph- B

c) Graph- D

d) Graph- F

e) Graph- H

f) Graph- C

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