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Analyze the following costs and measures of activity in Snowtown, USA that are listed below in this table. Each one of the costs must be classified as a variable cost or as a fixed cost for this particular analysis of cost behavior. There is only to be one answer in the Cost Behavior column -- either variable or fixed.

VERY IMPORTANT: There is only one final correct answer to each item in this list , so make sure you only type the word variable in the column, when that is your final answer to an item, or only type the word fixed in the column for an item if that is your final answer.

Item

Cost Description

Measure of Activity

Cost Behavior (Enter: Variable or Fixed)

1.

Cost of vaccine used at a clinic

Vaccines administered

2.

Building rent at a taco shop

Dollar sales

3.

Salary of production manager at a snowboard manufacturer

Snowboards produced

4.

Cost of electricity for production equipment at a snowboard manufacturer

Snowboards produced

5.

Ferry captain's salary on a regularly scheduled passenger ferry

Number of passengers

6.

Cost of glue used in furniture production

Units produced

7.

Janitorial wages at a snowboard manufacturer

Snowboards produced

8.

Depreciation on factory building at a snowboard manufacturer

Snowboards produced

9.

Cost of advertising at a snowboard company

Snowboards sold

10.

Cost of shipping bags of fertilizer to a customer at a chemical plant

Bags shipped

Question 3: a) Provide a definition for variable costs, and then explain how managers use variable costs to enable more effective decision making. Enter your final answer to this particular item in the space below this sentence.

Question 3: b) Provide a definition for fixed costs, and then explain how managers use fixed costs to inform decision making processes. Enter your final answer to this particular item in the space below this sentence.

Question 3: c) Analyze the information in this table and determine the correct cost behavior classification for each one of the separate items included in this list. Enter your final answer in the third column of the table for each separate item to indicate whether the cost is mainly a fixed cost or a variable cost with respect to the measure of activity listed next to it. This means the cost behavior category is either a variable cost or a fixed cost, and not both.

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