EXERCISE 5-12 (30 MINUTES)

2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE 2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
2. (Note: Students’ answers will vary due to the inherent imprecision of the quick-and-dirty method.) The fixed cost element can be obtained by noting the point where the line intersects the vertical (cost) axis. As shown on the scattergraph, this point is at approximately $2,500 per month. Given this figure, the vari-able cost element can be obtained by the following computation: Total cost at 12,000 miles driven per month* ... $4,000Less fixed cost element ... 2,500Variable cost element ... $1,500 *Note that total costs at this point fall on the line. Variable cost $1,500= =$0.125 per mile.Number of miles driven 12,000 miles Therefore, the cost of operating the autos can be expressed as $2,500 per month plus $0.125 per mile driven or Y = $2,500 + $0.125X.

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Solutions Manual, Chapter 5

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Problem 5-20 (30 minutes)