Question

THIS IS A VERY IMPORTANT QUESTION. PLEASE MAKE SURE YOU DO IT COMPLETELY AND UNDERSTAND THE CONCEPTS. VNA Enterprises, Inc. manufactures and sells a single product. A schedule of units sold for 3 months and related expenses are as follows: January February March Production in units 18900 22680 13230 Cost A $47327 $56512 $33549 Cost B $61425 $61425 $61425 Cost C $39123 $46948 $27386 Inspect the data in the table above. 1. Which cost is a variable cost? (Type A, B, or C) 2. Which cost is a fixed cost? (Type A, B, or C) 3. Which cost is a mixed cost? (Type A, B, or C) 4. What is the cost per unit for the variable cost (the cost referenced in question 1 of this problem)? Round your answer to the nearest penny. 5. All of these costs can be represented by a linear function. Can you write the equation for each cost? Try it on notebook paper- then see the feedback.

Answer 1

Req 1.
Cost A:
			Cost	Units
At 18900 units			47327	18900
At 22680			56512	22680
Change			9185	3780
Variable cost per unit= Change in cost /. Change in units
		9185 /3780 = 2.43 per unit
Fixed cost:
Total cost at 18900 units				47327
Less: variable cost(18900*2.43)				45927
Fixed cost:				1400
Therefore., Cost A is mixed cost
Cost B:
As observed, the total cost remain same at all level of production.
Therefore, Cost B is a fixed cost
Cost C:
			Cost	Units
At 18900 units			39123	18900
At 22680			46948	22680
Change			7825	3780
Variable cost per unit= Change in cost /. Change in units
		7825/ 3780 = 2.07 per unit
Fixed cost:
Total cost at 18900 units				39123
Less: variable cost(18900*2.07)				39123
Fixed cost:				0
Hence, Cost C is a variable cost.
Req 4.
Variable cost per unit:
variable portion of Cost A			2.43
Cost C			2.07
Total Vvariable cost per unit			4.5
Req 5.
Total fixed cost:
Fixed portion of Cost A			1400
Cost B			61425
Total fixed cost:			62825
Therefore,
Cosst equation is as under:
C (X) = 62825+ 4.5 x
where x= number of units