Johnson Hardware offers a range of merchandise for the maintenance of the home and cars. It is a small and simple business, with Pete Johnson doing most of the managerial and office work himself. He employs three clerks on an hourly basis who check out customers and help to stock the shelves. The following are his costs for various levels of business:

REQUIRED:

a. Determine which costs are fixed and which are variable.

b. Develop a cost formula for Johnson Hardware.

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Johnson Hardware Cost at Cost at Change in Cost, Change in Cost, Variability Cost at S10,000 S20,000 Sales S30,000 S10,00 to SZ0,000 S20,000 to (Variable S30,000 ales or Fixed) Resource Sales Sales Sales Labor $1,500 $2,500 $3,500 Building $40,000 $40,000 $40,000 Bags $500 $1,000 $1,500 Cash register $2,500 $2,500 $2,500 Display shelves $20,000 $20,000 $20,000 $- Total Variable Costs Cost Formula: Dollar Sales Plus