Question

2-What are the three primary types of cost behavior and how do they differ?

3-Give an example of variable cost.

4-Give an example of a fixed cost

5- Give an example of a mixed cost

6- What is the contribution margin?

11-What is the breakeven point?

12-How do you compute the breakeven point in dollars? • Exercises and problems 1, 2, 3, 4 (replace your workplace with “pizza shop”), 5, 9, 10 1-Classify the following costs as fixed, variable, or mixed. a) Building depreciation b) Employee wages c) Ticket printing costs d) Manager salaries e) Utilities f) Food and beverage costs g) Grounds maintenance h) Movie licensing fees

2- Classify the following costs as fixed, variable or mixed.

a) Janitorial services

b) Paper and ink costs

c) Advertising

d) Equipment depreciation

e) Repair and maintenance

f) Delivary driver salaries: Variable cost

g) Sales force commessions :

h) News wire fees.

3- Fill in the missing components for each of the following profit-planning formulas:

a) Contribution Margin Ratio (%)= --------------------divided by Unit Sales Price

b) Net Income =---------------- -Total Fixed costs

c) ---------------------= Total Fixed Costs Divided by Contribution Margin Ratio(%).

d) Contribution Margin Per Unit= Unit Sales Price - --------

e) Breakeven point( in Units) = Total Fixed cost divided by ---------------

f) Total contribution Margin = ----------------------x sales volume (in units)

g) Total Sales = ------------ x sales volum ( in Units)

h) Total Costs = Total Fixed Costs + ------------------------------------

4- Medical office a) Identify ten specific costs ( for example, rent, and wages) that the office will incur.

b) Classify each cost that you identified in part one as a variable, fixed or mixed and justify your classification.

Answer 1

2. There are three types of cost according to their behavior :

• .Fixed cost ?or period cost
• Variable cost or product cost
• Semi-variable cost or mixed cost

Difference between Fixed, Variable, and Semi-Variable cost:

Fixed cost: The cost which remains fixed in total amount with increase or decrease in the volume of output.

Variable Cost: The cost which vary in toatal in direct proportion to the volume of output.

Semi Variable Cost: The cost which are partly fixed and partly variable.

3. Example of Variable cost- Direct material cost, direct labour cost, power, repair .

4. Example of Fixed cost- Rent, Insurance of factory building, factory manager's salary.

5. Example of MIxed cost- Telephone bill, Gas, Electricity, cost of depriciation, repair and maintenance of buiding.

6. Contribution margin:

Contribution margin is the total of sales deducted by the variable cost.

Contribution margin = Total sales - Total Variable cost

11. Breakeven point:

The Contribution grows along with the sales revenue till the time it just covers the fixed cost. This point where neither profit nor losses have been made is known as breakeven point.

Break even point = Fixed cost / Contribution per unit

12. Computation of Breakeven points in Dollar:

Breakeven point (in Dollar) = Total Fixed cost / Contribution * Sales

1(a) Building depriciation ( Mixed Cost )

(b) Employee wages ( Fixed Cost)

(c) Ticket printing cost ( Variable Cost )

(d) Manager salary ( Fixed cost)

(e) Utilities ( fixed Cost )

(f) Food and beverage cost ( variable cost )

(g) Ground maintenance ( mixed cost )

(h) Movie Licensing fee ( variable cost )

2 (b) Paper and ink cost ( variable cost )

(c) advertising ( Mixed cost )

(d) equipment depreciaion ( Mixed cost )

(e) Repair and maintenance ( Mixed cost )

(f) delivery deiver salary ( Variable cost )

(g) sales force commesion ( variable cost )

(h) News wire fees ( Variable cost )

3.(a) Contribution Margin ratio = Total contribution margin divided by unit sale price

(c) Breakeven point = toal fixed cost divided by contibution margin ratio(%)

(d) Contribution margin per unit = Unit sale price - Variable cost per unit

(e) Breakeven point (in unit ) = total fixed cost divided by contribution per unit

(h) Total cost = Total fixed cost + Total variabl cost + total mixed cost