Discontinuous linear cost functions. (CPA, adapted) Select the graph that matches the numbered manufacturing cost data. Indicate by letter which of the graphs best fits each of the situations or items described.

The vertical axes of the graphs represent total dollars of cost, and the horizontal axes represent production output during a calendar year. In each case, the zero point of dollars and production is at the intersection of the two axes. The graphs may be used more than once.

1. Annual amortization of equipment, where the amount of amortization charged is computed by the machine-hours method.

2. Electricity bill—a flat fixed charge, plus a variable cost after a certain number of kilowatthours are used, where the quantity of kilowatt-hours used varies proportionately with quantity of production output.

3. City water bill, which is computed as follows:

The litres of water used vary proportionately with the quantity of production output. 4. Cost of lubricant for machines, where cost per unit decreases with each kilogram of lubri- cant used (for example, if one kilogram is used, the cost is $10; if two kilograms are used, the cost is $19.98; if three kilograms are used, the cost is $29.94) with a minimum cost per kilo- gram of $9.20. 5. Annual amortization of equipment, where the amount is computed by the straight-line method. When the amortization rate was established, it was anticipated that the obsoles- cence factor would be greater than the wear-and-tear factor. 6. Rent on a manufacturing plant donated by the city, where the agreement calls for a fixed fee payment unless 200,000 labour-hours are worked, in which case no rent need be paid. 7. Salaries of repair personnel, where one person is needed for every 1,000 machine-hours or less (that is, 0 to 1,000 hours requires one person, 1,001 to 2,000 hours requires two people, etc.). 8. Cost of direct materials used (assume no quantity discounts). 9. Rent on a manufacturing plant donated by the county, where the agreement calls for rent of $100,000 reduced by $1 for each direct manufacturing labour-hour worked in excess of 200,000 hours, but a minimum rental fee of $20,000 must be paid.LO1

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