NAME: TA: CHAPTER 2 HANDOUT - COST BEHAVIORS Outlaw Shoes operates a chain of shoe stores. The stores sell ten different styles of shoes with identical purchase costs and selling prices. Amanda, the CFO, is trying to determine the desirability of opening another store and wants your help determining the cost behavior of the company's expenses. Requirement A: Identify each description's cost behavior. DESCRIPTION Costs to Manufacture Each Pair of Shoes: 45% of Retail Price The company pays $9,000 per month in rent for their stores. The company pays $2,500 per month to their landlord to cover the following for utilities: electric, water and waste. The company pays a $15,000 salary per month to their Store Managers plus a 4% commission (of the retail price) for each pair of shoes sold. The company pays $14 per hour to their Sales Associates, plus a 1.5% commission (of the retail price) for each pair of shoes sold. During the quarter, the sales associates worked 3,750 hours. The company pays $4,000 per month for advertising. VARIABLE, FIXED OR MIXED COST Requirement B: Using the information provided above, complete the Contribution Margin Income Statement for the period January-March (3 MONTHS) assuming that the company sold 21,500 pairs of shoes at a retail price of $40. DESCRIPTION (ONE DESCRIPTION PER BOX) SHOW YOUR WORK AMOUNT (ONE NUMBER PER BOX) ACCT 201 MANAGERIAL ACCOUNTING I CH. 2 COST BEHAVIORS HANDOUT | PAGE 1