Question

Cover-to-Cover Company is a manufacturer of shelving for books. The company has compiled the following cost data, and wants your help in determining the cost behavior. After reviewing the data, complete requirements (1) and (2) that follow. Units Total Total Total Machine Produced Lumber Cost Utilities Cost Depreciation Cost 12,000 shelves $144,000 $14,800 $125,000 24,000 shelves $288,000 $28,600 $125,000 48,000 shelves $576,000 $56,200 $125,000 60,000 shelves $720,000 $70,000 $125,000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. Variable Cost Fixed Cost Mixed Cost None of these Lumber Utilities Depreciation 2. For each cost, determine the fixed portion of the cost, and the per-unit variable cost. If there is no amount or an amount is zero, enter "0". Recall that, for N= Number of Units Produced, Total Costs = (Variable Cost Per Unit x N) + Fixed Cost. Complete the following table with your answers. Cost Fixed Portion of Cost Variable Portion of Cost (per Unit) Lumber $ $ Utilities $ $ Depreciation $ $

Answer 1

1	Lumber cost:
	Units Produced	Lumber cost	Cost per unit
	12000	144000	12
	24000	288000	12
	48000	576000	12
	60000	720000	12
	It is a variable cost since cost per unit is $12 per unit produced
	Utilities cost:
	Units Produced	Utilities cost	Cost per unit
	12000	14800	1.233333
	24000	28600	1.191667
	48000	56200	1.170833
	60000	70000	1.166667
	It is a mixed cost since cost per unit changes in each level of unit produced.
	Depreciation cost:
	Units Produced	Utilities cost
	12000	125000
	24000	125000
	48000	125000
	60000	125000
	It is a fixed cost since total cost is same at each level of unit produced
		Variable Cost	Fixed Cost	Mixed Cost	None of these
	Lumber	x
	Utilities			x
	Depreciation		x
2	For utilities:
	Variable cost=Change in total cost/Change in units produced
	Consider highest and lowest level of activity. i.e,12000 units and 60000 units
	Variable cost=(70000-14800)/(60000-12000)=$1.15 per unit
	Consider 12000 units
	Fixed cost=Total cost-(Variable cost per unit*Unit produced)=14800-(1.15*12000)=$ 1000
	Cost	Fixed Portion of Cost	Variable Portion of Cost (per Unit)
	Lumber	0	12
	Utilities	1.15	1000
	Depreciation	0	125000