Question

Amasarcas Inc., is a wholesaler that distributes a single product. The company’s revenues and expenses for the last two months are given below:

Sales in units	5,000 units	6,000 units
Sales revenue	$500,000	$600,000
Expense A	10,000	10,000
Expense B	125,000	150,000
Expense C	50,000	74,000
Expense D	10,000	18,000
Expense E	30,000	30,000
Net income	$275,000	$318,000

Which of the expenses (A, B, C, D, and E) are variable? How can you tell?

Which of the expenses (A, B, C, D, and E) are fixed? How can you tell?

Which of the expenses (A, B, C, D, and E) are mixed? How can you tell?

Answer 1

							Change
	Units		5000		6000		1000	units
	Expenses A		10000		10000		0	(10000-10000)
	Expenses B		125000		150000		25000	(150000-125000)
	Expenses C		50000		74000		24000	(74000-50000)
	Expenses D		10000		18000		8000	(18000-10000)
	Expenses E		30000		30000		0	(30000-30000)
	The Expenses A and E are Fixed Expenses as there is no change in the expense with the increase in number of units
	Particulars			Per unit cost (Expense/ No of units)		Per unit cost (Expense/ No of units)	Per unit cost Change
	Units		5000		6000		1000
	Expenses B		125000	25	150000	25	0
	Expenses C		50000	10	74000	12.33	2.33
	Expenses D		10000	2	18000	3	1
	As the per unit cost for Expense B is same and doesn`t change with change in no of Unit, Expense B are Variable.
	Expense C and Expense D are neither fixed nor variable, these are mixed costs.