Question
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.
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 |
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Number of windshields installed | 2,200 |
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Variable expenses: |
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Direct materials | $250,500 |
Direct labour (1 hour per installation) | 34,250 |
Indirect materials | 11,000 |
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Fixed expenses: |
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Installation supervisors wages | $4,000 |
Installation schedulers wages | 2,750 |
Warehouse expenses | 5,250 |
Required:
- Calculate the per unit amounts for each of the variable expense and fixed expense items in July.
(10 marks)
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| Amount | July Activity | Per Unit |
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Variable expenses: |
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Fixed expenses: |
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- 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)
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| August Activity | August Total Cost | August Per Unit |
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Fixed expenses: |
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- Comment your findings in part (a) and (b). In addition to that, briefly explain differences between variable and fixed costs. (5 marks)
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