COST BEHAVIOR, CLASSIFICATION Smith Concrete Company owns enough ready-mix trucks to deliver up to 100,000 cubic yards of concrete per year (considering each truck’s capacity, weather, and distance to each job). Total truck depreciation is $200,000 per year. Raw materials (cement, gravel, and so on) cost about $25 per cubic yard of cement.

Required:

. Prepare a graph for truck depreciation. Use the vertical axis for cost and the horizontal axis for cubic yards of cement.

. Prepare a graph for raw materials. Use the vertical axis for cost and the horizontal axis for cubic yards of cement.

. Assume that the normal operating range for the company is 90,000 to 96,000 cubic yards per year. Classify truck depreciation and raw materials as variable or fixed costs.

Exercise