E5-1 (Static) Matching Terminology [LO 5-1, 5-5, 5-S1] Match each definition with its related term by selecting the appropriate term in the dropdown provided. (Select "None of these are correct" if there is no term for the "Definition"). Definition A. The way in which total cost behaves or changes, when some measure of activity changes. B. The range of activity over which assumptions about cost behavior hold true. C. A cost that changes in total in direct proportion to changes in activity while the per unit cost remains constant. D. A cost that is fixed over a narrow range of activity and increases multiple times across a relevant range. E. A cost that remains the same in total regardless of the activity level. F. Both the total cost and the cost per unit change with the level of activity. G. A cost that is fixed over a wide range of activity, but increases when a capacity limit is reached. H. The expression of the relationship between total cost and activity expressed as y = a + b(x). I. A visual representation of the relationship between total cost and activity level. J. The use of the two most extreme activity points to determine the variable cost per unit. K. A measure of how well the data is represented by the formula y = a + b(x). L. The difference between sales revenue and variable costs. M. The difference between the unit sales price and the unit variable costs. N. Unit contribution margin divided by the unit sales price. O. An external reporting method that reflects both the fixed and variable manufacturing costs in cost of goods sold. P. A costing method that focuses on cost behavior. Q. An internal income statement that separates fixed and variable costs. Term
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1. Sometimes firms conduct experiments where they temporarily change prices (this may be done with selective coupons and other discounting methods) to see how the consumer responds to a price change. Let's assume that our firm charges $15 per unit of output and on average has 400 units sold per day. However, for the last week the firm offered a $5 discount and charged only $10 per unit of output. During the week of the discount the firm observed that the average daily sales were 1000 units. (i) Given the price and quantity information, calculate the Elasticity of Demand for the product. (ii) What type of good/service is this (inelastic, elastic, etc.)? Explain. (iii) Interpret your elasticity calculation. Bonus: Part (iv) and (v) are considered bonus. (iv) If we operate under the assumption of ceteris paribus, what is the best linear representation of the demand faced by the firm [please provide the equation for the demand in terms of Q = f(P)]. Hint: This is just solving for the equation of the line...so solve for slope and intercept. Recall that to get the equation of a line we can choose one point and note: (Y - Y1) = M(X - X1) in this case your point would be (X1, Y1) (P,Q) where M = ΔQ / ΔP (v) If we continue to operate under the assumption that the demand is linear, what prediction can you make about the firm's level of sales at the price of $8? Use your solution to predict this.
Azat N.
Your company is planning to air a number of television commercials during the ABC Television Network's presentation of the Academy Awards. ABC is charging your company a variable cost of 1,600,000x - 90,000√(x) dollars for x 30-second television spots. Additional fixed costs (development and personnel costs) amount to $500,000. (a) Write down the cost function C, marginal cost function C', and average cost function C. C(x) = 1,600,000x - 90,000√(x) + 500,000 C'(x) = 1,600,000 - 45,000/√(x) C(x) = (1,600,000x - 90,000√(x) + 500,000)/x (b) Compute C'(3) and C(3). (Round all answers to the nearest $10,000.) C'(3) = 1,600,000 - 45,000/√(3) dollars per spot C(3) = (1,600,000(3) - 90,000√(3) + 500,000)/3 dollars per spot (c) Fill in the blanks: Since the marginal cost is less than the average cost per unit, increasing the number of advertising spots up from 3 will cause the average cost per spot to increase.
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Ranada Company manufactures and sells sportswear products. Ranada uses activity-based costing to determine the cost of customer return processing and shipping activity. The customer return processing activity has an activity rate of $45 per return, and the shipping activity has an activity rate of $10 per shipment. Ranada shipped 3,000 units of Product 1 in 1,200 shipments (some shipments are more than one unit). There were 150 returns. Determine the per-unit customer costs for combined shipping and returns of Product 1. a. $6.25 per unit b. $55 per unit c. $24.75 per unit d. $2.25 per unit Sebastian Company manufactures and sells sportswear products. Sebastian uses activity-based costing to determine the cost of customer return processing and shipping activity. The customer return processing activity has an activity rate of $60 per return, and the shipping activity has an activity rate of $20 per shipment. Sebastian shipped 4,000 units of Product 1 in 800 shipments (some shipments are more than one unit). There were 90 returns. Determine the total activity costs for the return and shipping activities of Product 1. a. $21,400 b. $5,500 c. $5,400 d. $71,200 Activity rates are calculated by a. Multiplying the budgeted activity cost by the total activity-base usage. b. None of these choices are correct. c. Dividing the total activity-base usage by the budgeted activity cost. d. Dividing the budgeted activity cost by the total activity-base usage.
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Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
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