Question

Exercise 11-10 Fixed versus variable cost behavior LO 11-1, 11-2 Baird Entertainment sponsors rock concerts. The company is considering a contract to hire a band at a cost of $55,000 per concert. Required a. What are the total band cost and the cost per person if concert attendance is 3,000, 3,500, 4,000, 4,500, or 5,000? b. Is the cost of hiring the band a fixed or a variable cost? Complete this question by entering your answers in the tabs below. Required A Required B What are the total and cost and the cost per person i concert attendance is 3.000, 3.500, 4000, 4500, or 5,0007 (Round "Cost per person answers to 2 decimal places.) 3,000 3.000 1.000 1.000 1.000 Number attending Total cost of concen Cool par person Required ) < Prev Next > MacBook Pro

Answer 1

Fixed Cost is the cost which is independent of the level of production or business activity. It doesn't increase with the increase in the level of production or units of sales. Per unit cost will reduce as the unit produced / sold increases. Variable Cost is the cost which is depended on the level of production or business activity. It increases or decreases with the increase or decrease in the level of production or units of sales. Per unit cost will remain constant irrespective of unit sold. Number Attendees (A) Total cost of Concert (B) Cost per person (B) (A) 3000 3500 4000 5000 4500 $55,000 $55,000 $55,000 $55,000 $55,000 $18.33 $15.71 $13.75 $12.22 $11.00 Since the cost of hiring the band remains constant regardless of the number of attending. It is a fixed cost