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
4,000 shelves	$48,000	$5,600	$130,000
8,000 shelves	96,000	10,200	130,000
16,000 shelves	192,000	19,400	130,000
20,000 shelves	240,000	24,000	130,000

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

Variable cost per unit remains same and changes as the level of units changed.
Fixed cost does not change as level of units changed.
Mixed costs are those costs which are combination of variable cost and fixed cost.
1)			Variable cost	Fixed Cost	Mixed cost	None of these
	Lumber		Variable cost
	Utilities				Mixed cost
	Depreciation			Fixed Cost
2)
		Cost	Fixed Portion of Cost		Variable Portion of Cost (per Unit)
		Lumber	0		$        12.00
		Utilities	$ 1,000		$          1.15
		Depreciation	$      1,30,000		0
	Working:
	Step-1:Calculation of Variable cost per unit
		Lumber:
		Units produced	Change in units	Total lumber cost	Change in cost	Variable cost per unit		Total Vaiable cos	Fixed Cost
		(a)	(b)	c)	(d)	e=(d/b)		f=a*e	g=c-f
		4,000		$             48,000
		8,000	4,000	$             96,000	$     48,000	$               12.00		$              96,000	0
		16,000	8,000	$         1,92,000	$     96,000	$               12.00		$          1,92,000	0
		20,000	4,000	$         2,40,000	$     48,000	$               12.00		$          2,40,000	0
		Utilities:
		Units produced	Change in units	Total Utilities cost	Change in cost	Variable cost per unit		Total Variable cost	Fixed Cost
		(a)	(b)	c)	(d)	e=(d/b)		f=a*e	g=c-f
		4,000		$               5,600
		8,000	4,000	$             10,200	$        4,600	$                 1.15		$                9,200	$       1,000
		16,000	8,000	$             19,400	$        9,200	$                 1.15		$              18,400	$       1,000
		20,000	4,000	$             24,000	$        4,600	$                 1.15		$              23,000	$       1,000
		Depreciation Cost:
		Units produced	Change in units	Total Utilities cost	Change in cost	Variable cost per unit		Total Variable cost	Fixed Cost
		(a)	(b)	c)	(d)	e=(d/b)		f=a*e	g=c-f
		4,000		$         1,30,000
		8,000	4,000	$         1,30,000	0	0		0	$ 1,30,000
		16,000	8,000	$         1,30,000	0	0		0	$ 1,30,000
		20,000	4,000	$         1,30,000	0	0		0	$ 1,30,000