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Cost Classification Without Answers
Cost Classification Without Answers
Cost Classification Without Answers
•09/02/2023
Assembly worker in a company manufacturing
ZAIRA ANEES
televisions. 10
Group the costs that are listed below as
DM, IDM, DL, IDL, DE, IDE
• Maintenance cost of delivery vehicle.
• Chief accountant
• Interest paid for the loan taken to buy a new delivery van.
• Rent of factory.
• Variable costs
• Step cost
• *change means increase in activity level will decrease cost per unit
and vice versa
09/02/2023 ZAIRA ANEES 33
Fixed costs
Total Cost
Units Total Cost Unit Cost 35000
30000
15000
1500 $30000 $20
10000
5000
2000 $30000 $15
0
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
25
15
5000 $30000 $6 10
0
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
09/02/2023 ZAIRA ANEES 34
Fixed cost
• Fixed cost in total Fixed cost per unit
• A variable cost is a cost which in total vary directly with the activity
level (with in relevant range) and per unit remain same.
0
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
2500 $10000 $4
Unit Cost
3000 $12000 $4 4.5
4
3.5
4000 $16000 $4 3
2.5 Unit Cost
2
5000 $20000 $4 1.5
1
0.5
0
09/02/2023 ZAIRA500
ANEES
1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 37
Variable cost
• Variable cost per unit Variable in total
• Semi variable cost per unit decreases with increase activity level
20000
1000 $7000 $7
15000 Total Cost
5000
2000 $11000 $5.5
0
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
3000 $15000 $5 7
6
5
4000 $19000 $4.75 4
Unit Cost
3
5000 $23000 $4.6 2
1
0
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
09/02/2023 ZAIRA ANEES 41
Semi variable cost
• Semi variable cost in total Semi variable cost per unit
30000
1000 $15000 $15
25000
10000
2000 $15000 $7.5 5000
0
2500 $15000 $6 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
Unit Cost
2501 $30000 $12 16
14
12
3000 $30000 $10 10
Unit Cost
8
4000 $30000 $7.5 6
4
5000 $30000 $6 2
0
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
09/02/2023 ZAIRA ANEES 44
Step variable costs (Descending)
Units Total Cost Unit Cost Total Cost
16000
6000
Unit Cost
2501 $7503 $3 4.5
4
3000 $9000 $3 3.5
3
2.5 Unit Cost
4000 $12000 $3 2
1.5
5000 $15000 $3 1
0.5
0
09/02/2023 ZAIRA
500ANEES
1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 45
Step variable costs (Ascending)
Units Total Cost Unit Cost Total Cost
30000
20000
Total Cost
1500 $6000 $4 15000
10000
0
2500 $10000 $4 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
Unit Cost
2501 $12505 $5 6
3000 $15000 $5 4
Unit Cost
3
4000 $20000 $5
2
1
5000 $25000 $5
0
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500
09/02/2023 ZAIRA ANEES 46
09/02/2023 ZAIRA ANEES 47
Identify behavior of cost
• Expense at Expense at Expense at Expense at
• 500 units1000 units 2000 units 2,500 units
• £ £ ££
• Expense A 2,0002,000 2,000 2,000
• Expense B 8,0008,000 9,000 9,000
• Expense C 625 1,250 2,500 3,125
• Expense D 400 800 1,600 2,000
• Expense E 2,5005,000 12,000 15,000
• Expense F 11,500 16,500 26,500 31,500
• Required: -
• Classify above costs according to their behaviors that either they are fixed, variable or semi variable.
• A __________________.B __________________.
• C __________________. D __________________.
• E __________________.
09/02/2023 ZAIRA ANEES 48
1.
• The following shows the cost per unit of an item of expense at different levels
of activity:
• Activity (units) Cost per unit (£)
• 1 10,000
• 50 200
• 100 120
• 150 80
• What is the correct behavioural classification for the expense item?
• A Fixed cost B Semi-variable cost
• C Stepped-fixed cost D Variable cost
09/02/2023 ZAIRA ANEES 49
2.
• Which of the following would be classified as a fixed cost in the
operation of a motor vehicle?
• A Oil change every 10,000 kilometres
• B Petrol
• C Insurance
• D Tyre replacement