A number of graphs displaying cost behaviour patterns are shown below. The vertical axis on each graph

Question:

A number of graphs displaying cost behaviour patterns are shown below. The vertical axis on each graph represents total cost, and the horizontal axis represents the level of activity (volume).


Required:

1. For each of the following situations, identify the graph that illustrates the cost behaviour pattern involved. Any graph may be used more than once.

2 5 4 8.


a. Charges for data usage on a smartphone plan-a flat fixed charge for the first 500 MB, plus a variable cost per megabyte for usage above 500 MB.

b. Wages for software development staff, all of whom are paid a fixed monthly salary. 

c. Licensing fees paid to the provincial government to operate dog sled tours. A fee of $10 per tour is paid for the first 1,000 tours, with no additional fees paid if tours exceed 1,000.

d. Cost of raw materials, where the cost starts at $7 .50 per unit and then decreases by 5 cents per unit for each of the first 100 units purchased, after which it remains constant at $2.50 per unit.

e. Cost of a monthly high-speed Internet plan, where $50 is charged for 0-250 MB usage, $75 for 251 to 500 MB usage, $100 for 501 to 750 MB usage, and $125 for 751 MB usage and above.

f. Wage expense paid to tree planters who receive $0.10 per tree planted.

g. Rent on a factory building donated by the county, where the agreement calls for rent of $100,000 Jess $1 for each direct labour our worked in excess of 200,000 hours, but a minimum rental payment of $20,000 must be paid.

h. Wages paid to sales staff who receive a fixed salary per month and sales commissions equal to 5% of sales for every sales dollar they generate above $250,000. No additional commissions are paid for sales above $1,000,000.

i. Raw materials costs, where the first I ,000 units cost SI per unit, with the unit cost dropping to $0.80 per unit for quantities above I ,000. 

2. How would a knowledge of cost behaviour patterns such as those above help a manager analyze the cost structure of his or her company?

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Related Book For  book-img-for-question

Managerial Accounting

ISBN: 9781259275814

11th Canadian Edition

Authors: Ray H Garrison, Alan Webb, Theresa Libby

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