Q1. (25 marks) Cost Behaviour

Big Bus Inc. specializes in the repair and replacement of windshields for busses. Costs related to July are provided below.

Item
Number of windshields installed	2,200
Variable expenses:
Direct materials	$250,500
Direct labour (1 hour per installation)	34,250
Indirect materials	11,000
Fixed expenses:
Installation supervisors wages	$4,000
Installation schedulers wages	2,750
Warehouse expenses	5,250

Required:

1. Calculate the per unit amounts for each of the variable expense and fixed expense items in July.

(10 marks)

Item
	Amount	July Activity	Per Unit
Variable expenses:
Fixed expenses:

2. Management expects that 2,700 windshields will be installed in August and that this level of activity is within the relevant range for all variable and fixed expenses.

Calculate the total expense and per unit amounts for each of the variable and fixed cost items in August.

(10 marks)

Item
	August Activity	August Total Cost	August Per Unit
Variable expenses:
Fixed expenses:

3. Comment your findings in part (a) and (b). In addition to that, briefly explain differences between variable and fixed costs. (5 marks)