Question

12. What is a variable cost? Provide two examples of variable costs. 13. What is a semi variable cost? Provide two examples of semi variable costs. 14. Your department purchased $10,000 of supplies on 6/30/20. All of these supplies were used by your department in July 2020. How would the supplies be recorded on the balance sheet and income statement in June 2020 and July 2020? 15. Your department purchased a $50,000 ultrasound machine on August 31, 2020 with cash. You will start depreciating the ultrasound machine in September using the straight-line method ($50,000 over 5 years = $50,000/5 years = $10,000 depreciation expense per year or $833 depreciation expense per month). How would the ultrasound machine be recorded on the balance sheet and income statement in August 2020 and September 2020?

Answer 1

Answer- 12

A variable cost is a cost that changes in proportion to production as the output increases the cost also get increase. When manufacturing of units increases, variable costs also increase; when manufacturing of units decreases, variable costs also decrease.

Examples -

1. Direct Labour Cost

Suppose 1 unit require to 2 labour hour @ $10 per hour i.e 2 hours x $10 per hour = $20

5 units will require 5 units x 2 labour hours i.e 10 hours x $10 per hour = $100

2. Direct Material used

Suppose 1 unit require to 1 Raw material unit @ $10 i.e 1 unit x $10 unit = $10

5 units will require 5 units x 1 raw material unit i.e 5  x $10 unit = $50

Answer - 13

A semi-variable cost is known as mixed cost, is a cost composed of a mixture of both fixed and variable components. Costs are fixed upto a certain level of production, and then becomes variable as sson as the level of  production increase. Fixed cost will continue to occur if there is no production.

Examples -

1. Sales Person salary

Sales Person salary has a fixed component of salary and variable component of commission on sales.

2. Electricity Cost

There is certain fixed charges we incurred in our electricty bll and as the number of elctric units consumed bill amount get increases.

Answer 14

Only shown the recording of supplies in the Income statment and Balance sheet.

June 2020 July 2020 Income Statment Revenues Expenses Supplies Expense $ (10,000.00) Profit/(Loss) $ $ (10,000.00) June 2020 Balance Sheet Equity & Liabilities July 2020 ShareHolder's Fund Equity Reserves & Surplus Non-Current Liabilities Current Liabilities (10,000.00) Total (10,000.00) Assets Non-Current Assets Current Assets Supplies 10,000.00 $ Total $ 10,000.00 $

Answer -15

Only shown the recording of machine in the Income statment and Balance sheet.

Income Statment Revenues Aug 2020 Sep 2020 Expenses Depriciation S (833.00) Profit /(Loss) S $ (833.00) Aug 2020 Sep 2020 Balance Sheet Equity & Liabilities ShareHolder's Fund Equity Reserves & Surplus Non- Current Liabilities Current Liabilities (833.00) Total (833.00) 50,000.00 $ 49,167.00 Assets Ultrasound machine Non-Current Assets Current Assets Supplies S Total S 50,000.00 $ 49,167.00

Value of machine Sep 2020 = Opening balance - Depriciation

= 50,000 - 833

=$49,167.00