Question

Qution Completion Status: QUESTION 19 The Pate Company reported the following Cost A.. Cost B Cost C Month 1 Month 2 6,0008,000 35,000 $36,000 16,000 $16,000 $1,500 $2,000 Required: For each of the three costs above, indicate whether it is probably a variable, mixed or fxed cost Cost A ▼CostB ▼ Cost C b Mived C Variable QUESTION 20 Identify for each of the following costs whether it is a fixed or Variable Cost A Variable B Fixed Direct materials Insurance on factory equipment tren wetPndi",a-aiim kesan,าค dm pomntevi major delrin tart The high-low method of analyzing mixed costs is simple to apply, but suffers from O True QUESTION 21 False 1 subrnit. Cliok Save All Ansuers to save all anscers

Answer 1

Variable Costs are those costs which vary per unit. Fixed Costs remain fixed irrespective of the level of production. Mixed costs are those costs, certain part of which remain fixed and certain part varies per unit.

Cost A: if variable, cost for month 2 based on first month should be 35,000*8,000/6,000

= $46,667

Since, it has changed but not proportionately, it is a MIXED COST

Cost B: Since it has remained the same in month 1 as well as Month 2, it is a FIXED COST

Cost C: if variable, cost for month 2 based on first month should be 1,500*8,000/6,000

= $2,000

Since it varies proportionately, it is a VARIABLE COST

20.Direct Material varies per unit of output, hence a VARIABLE COST

Insurance on Factory Equipment remains the same and does not change with the level of production and is thus a FIXED COST

21. TRUE

Under the high low method, difference of costs is divided with the difference in units, to identify variable cost per unit. Since it takes into account only 2 data points, it suffers from the drawback.