EXERCISE 5-12 (30 MINUTES)

3. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE 3. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
3. Expected total cost would be: Fixed cost... $ 3,700 Variable cost (8 sections × $1,750 per section)... 14,000 Total cost ... $17,700 The problem with using the cost formula from (2) to derive total cost is that an activity level of 8 sections may lie outside the relevant range—the range of activity within which the fixed cost is approximately $3,700 per term and the variable cost is approximately $1,750 per section of-fered. These approximations appear to be reasonably accurate within the range of 2 to 6 sections, but they may be invalid outside this range. Problem 5-15 (continued)