20 Jul DEPRECIATION OF EQUIPMENT, WHERE THE AMOUNT IS COMPUTED BY THESTRAIGHT-LINE METHOD.
A number of graphs displaying cost behavior patterns are shownbelow. The vertical axis on each graph represents total cost, andthe horizontal axis represents level of activity (volume).
Required:
1. For each of the following situations, identify the graph belowthat illustrates the cost behavior pattern involved. Any graph maybe used more than once.
a. Cost of raw materials used.
b. Electricity billâa flat fixed charge, plus a variable cost aftera certain number of kilowatt-hours are used.
c. City water bill, which is computed as follows:
d. Depreciation of equipment, where the amount is computed by thestraight-line method. When the depreciation rate was established,it was anticipated that the obsolescence factor would be greaterthan the wear and tear factor.
e. Rent on a factory building donated by the city, where theagreement calls for a fixed fee payment unless 200,000 labor-hoursor more are worked, in which case no rent need be paid.
f Salaries of maintenance workers, where one maintenance worker isneeded for every 1,000 hours of machine-hours or less (that is, 0to 1,000 hours requires one maintenance worker, 1.001 to 2,000hours requires two maintenance workers, etc.).
g. Cost of raw materials, where the cost starts at $7.50 per unitand then decreases by 5 cents per unit for each of the first 100units purchased, after which it remains constant at $2.50 perunit.
h. Rent on a factory building donated by the county, where theagreement calls for rent of $100,000 less $1 for each directlabor-hour worked in excess of 200,000 hours, but a minimum rentalpayment of $20,000 must be paid.
i. Use of a machine under a lease, where a minimum charge of $1,000is paid for up to 400 hours of machine time. After 400 hours ofmachine time, an additional charge of $2 per hour is paid up to amaximum charge of $2,000 per period.
A number of graphs displaying cost behavior patterns are shownbelow. The vertical axis on each graph represents total cost, andthe horizontal axis represents level of activity (volume).
Required:
1. For each of the following situations, identify the graph belowthat illustrates the cost behavior pattern involved. Any graph maybe used more than once.
a. Cost of raw materials used.
b. Electricity billâa flat fixed charge, plus a variable cost aftera certain number of kilowatt-hours are used.
c. City water bill, which is computed as follows:
d. Depreciation of equipment, where the amount is computed by thestraight-line method. When the depreciation rate was established,it was anticipated that the obsolescence factor would be greaterthan the wear and tear factor.
e. Rent on a factory building donated by the city, where theagreement calls for a fixed fee payment unless 200,000 labor-hoursor more are worked, in which case no rent need be paid.
f Salaries of maintenance workers, where one maintenance worker isneeded for every 1,000 hours of machine-hours or less (that is, 0to 1,000 hours requires one maintenance worker, 1.001 to 2,000hours requires two maintenance workers, etc.).
g. Cost of raw materials, where the cost starts at $7.50 per unitand then decreases by 5 cents per unit for each of the first 100units purchased, after which it remains constant at $2.50 perunit.
h. Rent on a factory building donated by the county, where theagreement calls for rent of $100,000 less $1 for each directlabor-hour worked in excess of 200,000 hours, but a minimum rentalpayment of $20,000 must be paid.
i. Use of a machine under a lease, where a minimum charge of $1,000is paid for up to 400 hours of machine time. After 400 hours ofmachine time, an additional charge of $2 per hour is paid up to amaximum charge of $2,000 per period.
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