1. The previous manager of

GoldGym

started the following schedule but left before completing it. The manager was not sure but thought theclub's fixed operating costs were

$5,000

per month and the variable operating costs were

$1

per member per month. Theclub's existing facilities could serve up to

1,100

members per month.

Requirements

1.	Complete the schedule shown below for different levels of monthly membership assuming the previousmanager's cost behaviour estimates are accurate.
2.	As the manager of the fitnessclub, why should you not use the average cost per member to predict total costs at different levels ofmembership?

Question content area bottom

Part 1

Requirement 1. Complete the following schedule for different levels of monthly membership assuming the previousmanager's cost behaviour estimates are accurate.(Round all unit costs to the nearestcent.)

Monthly Operating Costs	100 members	200 members	1,100 members
Total variable costs
Total fixed costs
Total operating costs
Variable cost per member
Fixed cost per member
Average cost per member

Part 2

Requirement 2.As the manager of the fitnessclub, whyshouldn't you use the average cost per member to predict total costs at different levels ofmembership?

The average cost per member should not be used to predict total costs at different volumes of membership because

the average cost per member changes as volume changes.

only the fixed cost per member should be used to predict total costs.

the data is not reliable.

The average cost per member

decreases as volume increases

increases as volume increases

due to the

fixed

variable

component of theclub's operating costs. Managers should base cost predictions on

cost behaviour patterns,

fixed costs only,

variables costs only,

not on the average cost per member.

2.

The following chart shows three differentcosts: CostA, CostB, and Cost C. For eachcost, the chart shows the total cost and cost per unit at two different volumes within the same relevant range. Based on thisinformation, identify each cost asfixed, variable, or mixed. Explain your answers.

	At 5,000 units	At 6,000 units
	Total Cost	Cost per Unit	Total Cost	Cost per Unit
Cost A	$30,000	$6.00	$36,000	$6.00
Cost B	$30,000	$6.00	$30,000	$5.00
Cost C	$30,000	$6.00	$33,000	$5.50

Question content area bottom

Part 1

Cost A is a

fixed cost

mixed cost

variable cost

.

Total costs

decrease

increase

stay the same

and the per unit costs

are not constant

remain constant

as the volume increases.

Part 2

Cost B is a

fixed cost

mixed cost

variable cost

.

Total costs

decrease

increase

stay the same

and the per unit costs

decrease

increase

stay the same

as the volume increases.

Part 3

Cost C is a

fixed cost

mixed cost

variable cost

.

Total costs

are not constant

remain constant

and the per unit costs

are not constant

remain constant

as the volume increases.