Cost Behavior Identification. The controller for Krispy Cereal Company has been analyzing the cost behavior of several
Question:
Cost Behavior Identification. The controller for Krispy Cereal Company has been analyzing the cost behavior of several of the company's costs, as described below.
a. The company puts a toy that costs 7 cents in each box of cereal. Sales are not expected to exceed 50,000 boxes a month.
b. The firm pays rent of $7,500 per month for a building in which it can manufacture up to 50,000 boxes of cereal per month.
c. Accounts receivable clerks are paid $1,250 per month. One clerk is needed for each 10,000 boxes sold per month.
d. The cost of office supplies seem to vary with sales. Yet, last year when production was stopped for two weeks, office supplies were still used. Analysis of data for last year shows that, in one month, when 45,000 boxes were sold, office supplies expense totaled $1,500. In another month. when only 15,000 boxes were sold, office supplies expense totaled $600. Required: For each lettered item. identify the type of cost behavior pattern described by the data. Draw a graph for each item described.
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