Question 1

Determine whether each of the following is best described as a fixed, variable, or mixed cost with

respect to product units.

1. Rubber used to manufacture athletic shoes.

2. Maintenance of factory machinery.

3. Packaging expense.

4. ages of an assembly-line worker paid on the basis of acceptable units produced.

5. Factory supervisor's salary.

6. Taxes on factory building.

7. Depreciation expense of warehouse.

Part B

A jeans maker is designing a new line of jeans called Slims. The jeans will sell for $205 per pair and

cost $164 per pair in variable costs to make.

1. Compute the contribution margin per pair.

2. Compute the contribution margin ratio.

3. Describe what the contribution margin ratio reveals about this new jeans line.