Types of Costs Cashion Company produces chemical mixtures for veterinary pharmaceutical companies. Its factory has four mixing lines that mix various powdered chemicals together according to specified formulas. Each line can produce up to 5,000 barrels per year. Each line has one supervisor who is paid $34,000 per year. Depreciation on equipment averages $16,000 per year. Direct materials and power cost about $4.50 per unit. Required: 1. Assume that sales range from 0 to 20,000 units. Based on the information provided, select the correct graph for each of these three costs: equipment depreciation, supervisors' wages, and direct materials and power. Graphs of equipment depreciation: a. b. Equipment Depreciation Equipment Depreciation Cost $20,000 $15,000 $10,000 $5,000 $0 $20,000 $15,000 $10,000 $5,000 $0 0 1 0 5,000 10,000 15,000 20,000 25,000 Number of Units 5,000 10,000 15,000 20,000 25,000 Number of Units d. C. Equipment Depreciation Equipment Depreciation Cost $20,000 $15,000 $10,000 $5,000 $20,000 $15,000 $10,000 $5,000 $0 $0 0 0 5,000 5.000 10,000 15,000 20,000 25,000 Number of Units 10,000 15,000 20,000 25.000 Number of Units Graph of supervisors' wages: a. b. Supervisors' Wages Supervisors' Wages $160,000 $140,000 $120,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 Cost Cost $100,000 $80,000 $60,000 $40,000 $20,000 $20,000 $0 $0 0 5,000 20,000 25,000 0 5,000 20,000 25,000 10,000 15,000 Number of Units 10,000 15,000 Number of Units c. d. Supervisors' Wages Supervisors' Wages $160,000 $140,000 $120,000 $100,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 Cost $80,000 $60,000 Cost $40,000 $20,000 $20,000 $0 + $0 + 0 5,000 20,000 25.000 0 5,000 20,000 25,000 10,000 15,000 Number of Units 10,000 15,000 Number of Units Graph of direct materials and power: b. Direct Materials and Power Direct Materials and Power Cost $100,000 $80,000 $60,000 $40,000 $20,000 $o 0 Cost $100,000 $80,000 $60,000 $40,000 $20,000 $0 0 5.000 20.000 25.000 5,000 20.000 25,000 10,000 15,000 Number of Units 10,000 15.000 Number of Units c. d. Direct Materials and Power Direct Materials and Power Cost $100,000 $80,000 $60,000 $40,000 $20,000 SO 0 Cost $100,000 $80,000 $60,000 $40,000 $20,000 $0 0 5.000 20.000 25,000 5,000 20,000 25.000 10,000 15,000 Number of Units 10,000 15,000 Number of Units The correct answer is 2. Assume that the normal operating range for the company is 15,000 to 19,000 units per year. How would you classify each of the three types of cost? Equipment depreciation: Supervisors' wages: Direct materials and power
