Solution:

EXERCISE 6-25

$24,100 − $22,100
1. =$ .10
Variable cost per pint of applesauce produced = 41,000 − 21,000

Total cost at 41,000 pints............................................................................. $24,100

Variable cost at 41,000 pints
(41,000  $.10 per pint).....................................................................   4,100
Fixed cost..................................................................................................... $20,000

Cost equation:

Total energy cost = $20,000 + $.10X,

where X denotes pints of applesauce produced

2. Cost prediction when 26,000 pints of applesauce are produced

Energy cost = $20,000 + ($.10) (26,000) = $22,600

Solution:

EXERCISE 6-29

1. a. Fixed

b. Variable

c. Variable

d. Fixed

e. Semivariable (or mixed)

2. Production cost per month = $33,000* + $2.00X †

 *33,000 = $19,000 + $10,000 + $4,000

EXERCISE 6-34

$1,900 − $1,300
1. Variable utility cost per = = $2.00
hour 700 − 400

Total utility cost at 700 hours........................................................................

$ 1,900
Variable utility cost at 700 hours ($2.00  700 hours)..................................   1,400
Fixed cost per month.....................................................................................
$   500

Cost formula:

Monthly utility cost = $500 + $2.00 X , where X denotes hours of operation.

Homework: Problem 6-38

$4,470 − $2,820
Variable maintenance cost per hour of service =
520 − 300
 = $7.50/ hour of service
Highest Level of Activity

Total Cost = $4,470

Total Cost = Total Fixed Cost + Total Variable Cost

$4,470 = X + (No. of unit * VC per unit)

$4,470 = X + (520 * $7.5/hour)

X= $570

Lowest Level of Activity

Total Cost = $2,820

Total Cost = Total Fixed Cost + Total Variable Cost

$2,820 = X + (No. of unit * VC per unit)

$2,820 = X + (300 * $7.5/hour)

X= $570

Determine the cost formula:

Y = a +b *X

Monthly maintenance cost= Y = $570 + $7.5*X

2. The variable component of the maintenance cost is $7.50 per hour of service.

3. Level of Activity = 590 hours

Monthly maintenance cost= Y = $570 + $7.5*X

Monthly maintenance cost= Y = $570 + $7.5* 590 hours = $4,995

4. Variable cost per hour is the same, does not change. On a per unit basis, variable cost is fixed. In total,
it changes based on the level of activity.

Fixed cost, in total is fixed, it does not change. On a per unit basis, it changes based on the level of
activity. The more unit we produce/consume, the lower the fc per unit.

Fixed cost per unit = Total fixed cost/ Total no. of units

= $570/ 600 hours

= $ 0.95/ hour