The graphs below represent cost behavior patterns that might occur in acompany's cost structure. The vertical axis represents total cost, and thehorizontal axis represents activity output. Required:For each of the following situations, choose the graph from the group a-1 that best illustrates the cost pattern involved. Also, for each situation,identify the driver that measures activity output. 1. The cost of power when a fixed fee of $500 per month is chargedplus an additional charge of $0.12 per kilowatt-hour used2. Commissions paid to sales representatives. Commissions arepaid at the rate of 5 percent of sales made up to total annual salesof $500,000, and 7 percent of sales above $500,000.3. A part purchased from an outside supplier costs $12 per part for the first 3,000 parts and $10 per part for all parts purchased inexcess of 3,000 units.4. The cost of surgical gloves, which are purchased in incrementsof 100 units (gloves come in boxes of 100 pairs).5. The cost of tuition at a local college that charges $250 per credit hour up to 15 credit hours. Hours taken in excess of 15 are free.6. The cost of tuition at another college that charges $4,500 persemester for any course load ranging from 12 to 16 credit hours.Students taking fewer than 12 credit hours are charged $375 per credit hour. Students taking more than 16 credit hours are charged$4,500 plus $300 per credit hour in excess of 16.7. A beauty shop's purchase of soaking solution to remove artificialnails. Each jar of solution can soak off approximately 50 nailsbefore losing its effectiveness.B. Purchase of diagnostics equipment by a company for inspection of incoming orders.9. Use of disposable gowns by patients in a hospital10. Cost of labor at a local fast-food restaurant. Three employeesare always on duty during working hours; more employees can becalled in during periods of heavy demand to work on an "as- needed" basis.11. A manufacturer found that the maintenance cost of its heavymachinery was tied to the age of the equipment. Experienceindicated that the maintenance cost increased at an increasing rateas the equipment aged.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
The graphs below represent cost behavior patterns that might occur in a
company's cost structure. The vertical axis represents total cost, and the
horizontal axis represents activity output.
Required:
For each of the following situations, choose the graph from the group a-
1 that best illustrates the cost pattern involved. Also, for each situation,
identify the driver that measures activity output.
1. The cost of power when a fixed fee of $500 per month is charged
plus an additional charge of $0.12 per kilowatt-hour used
2. Commissions paid to sales representatives. Commissions are
paid at the rate of 5 percent of sales made up to total annual sales
of $500,000, and 7 percent of sales above $500,000.
3. A part purchased from an outside supplier costs $12 per part for the first 3,000 parts and $10 per part for all parts purchased in
excess of 3,000 units.
4. The cost of surgical gloves, which are purchased in increments
of 100 units (gloves come in boxes of 100 pairs).
5. The cost of tuition at a local college that charges $250 per credit hour up to 15 credit hours. Hours taken in excess of 15 are free.
6. The cost of tuition at another college that charges $4,500 per
semester for any course load ranging from 12 to 16 credit hours.
Students taking fewer than 12 credit hours are charged $375 per credit hour. Students taking more than 16 credit hours are charged
$4,500 plus $300 per credit hour in excess of 16.
7. A beauty shop's purchase of soaking solution to remove artificial
nails. Each jar of solution can soak off approximately 50 nails
before losing its effectiveness.
B. Purchase of diagnostics equipment by a company for inspection of incoming orders.
9. Use of disposable gowns by patients in a hospital
10. Cost of labor at a local fast-food restaurant. Three employees
are always on duty during working hours; more employees can be
called in during periods of heavy demand to work on an "as- needed" basis.
11. A manufacturer found that the maintenance cost of its heavy
machinery was tied to the age of the equipment. Experience
indicated that the maintenance cost increased at an increasing rate
as the equipment aged.
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