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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

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:

  1. 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:

  1. 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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