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Chapter 20: Q1RQ (page 1119)

What is a variable cost? Give an example.

Short Answer

Expert verified

Variable costs are the costs that show consistency on per unit basis.

Step by step solution

01

Meaning of variable cost

The cost that is function of other variable is known as a variable cost. It remains same on per unit basis but keeps on changing in total amount with the change in level of sales.

02

:Examples of variable cost

  1. Material cost per unit
  2. Labor cost per hour
  3. Selling and administration cost per unit.

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Most popular questions from this chapter

A chain of convenience stores has one manager per store who is paid a monthly salary. Relative to Store #36 located in Atlanta, Georgia, is the manager’s salary fixed or variable? Why?

On the CVP graph, where is the breakeven point shown? Why?

Question: This problem continues the Piedmont Computer Company situation from Chapter 19. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is \(750 and the weighed-average variable cost per unit is \)450. The company does not expect the sales mix to vary for the next year. Average fixed costs per month are \(156,000.

Requirements

1. What is the number of units that must be sold each month to reach the breakeven point?

2. If the company currently sells 945 units per month, what is the margin of safety in units and dollars?

3. If Piedmont Computer Company desires to make a profit of \)15,000 per month, how many units must be sold?

4. Piedmont Computer Company thinks it can restructure some costs so that fixed costs will be reduced to \(90,000 per month, but the weighted-average variable cost per unit will increase to \)525 per unit. What is the new breakeven point in units? Does this increase or decrease the margin of safety? Why or why not?

What is the purpose of using the high-low method?

What are the CVP assumptions?
See all solutions

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