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Explain the cost-behavior patterns of variable and fixed cost. Give an example of each. Jones and Heather started the JH Widget Company in 2014 to
Explain the cost-behavior patterns of variable and fixed cost. Give an example of each. Jones and Heather started the JH Widget Company in 2014 to manufacture widgets. They rented a building, bought equipment, and hired employees to work full time at fixed monthly salaries. Utilities and other operating charges remained fairly constant during each month. JH Widget Company sells each widget at $70 each. JH paid fixed costs of $5,850 per month and variable costs of $25 per widget. Jones and Heather are concerned about the break-even and probability. Using the equation method to do your calculations, explain to Jones and Heather how many widgets must be sold, and the totals sales revenue that must be reached, in order to breakeven. The president of the Gulf Coast Refining Corporation wants to know why his golfing partner, who is the chief financial officer of a large construction company calculates his costs by the job when his own corporation calculates costs by large units, rather than by individual ban el of oil. Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems
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