EXERCISE 1-4 Fixed and Variable Cost Behavior LO1-4 Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,200 and the variable cost per cup of coffee served is $0.22. Required: 1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity. Round off the average cost per cup of coffee to the nearest tenth of a cent. Cups of Coffee Served in a Week 2,000 2, 100 2,200 Fixed cost . .... Variable cost. . .... Total cost. . . .. Average cost per cup of coffee served . . . . .. 2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases? Explain.EXERCISE 1-5 Differential. Sunk. and Opportunity Costs LO15 Northeast Hospital's Radiology Department is considering replacing an old inefcient X-ray machine with a state-of-theart digital Xray machine. The new machine would provide higher quality Xrays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to pro- duce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer. Required: For each of the items below. indicate by placing an X in the appropriate column whether it should be considered a differential cost, a sunk cost, or an opportunity cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, leave all columns blank. Ex. Cost of x-ray lm used in the old machine ............... 1. Cost of the old Xray machine ......................... 2. The salary of the head of the Radiology Department ...... 3. The salary of the head of the Laboratory Department ..... 4. Cost of the new color laser prlnter ...................... 5. Rent on the space occupied by Radiology ............... 6. The cost of maintaining the old machine ................. 7. Benets from a new DNA analyzer ...................... 8. Cost of electricity to run the X-ray machines ............. EXERCISE 1-6 Traditional and Contribution Format Income Statements LO1-6 Cherokee Inc. is a merchandiser that provided the following information: Amount Number of units sold .... 20,000 Selling price per unit. . ... . $30 Variable selling expense per unit. . . . . $4 Variable administrative expense per unit . ..... $2 Total fixed selling expense . . .. . $40,000 Total fixed administrative expense $30,000 Beginning merchandise inventory . . $24,000 Ending merchandise inventory . ... $44,000 Merchandise purchases..... $180,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.EXERCISE 1-7 Direct and Indirect Costs LO1-1 Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials . . . $7.00 Direct labor. . . . $4.00 Variable manufacturing overhead $1.50 Fixed manufacturing overhead. $5.00 Fixed selling expense. $3.50 Fixed administrative expense . $2.50 Sales commissions . . $1.00 Variable administrative expense. $0.50 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 20,000 units? b. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 units. a. How much total manufacturing cost is directly traceable to the Manufacturing Department? b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department? 3. Assume the cost object is the company's various sales representatives. Furthermore, assume that the company spent $50,000 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives' compensation. a. When the company sells 20,000 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 20,000 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives? 4. Are Kubin's administrative expenses always going to be treated as indirect costs in its internal management reports