Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
9.13 Matching graphs with descriptions of cost behaviour. (20 min)
1 (1)
2 (7) A step-function cost rather than a fixed cost.
3 (11)
4 (2)
5 (9)
6 (12)
7 (3)
8 (9)
9.14 Account analysis method. (20 min)
1Variable
costs Car wash labour €240,000 Soap, cloth and supplies
32,000 Water
28,000
Power to move conveyor belt 72,000 Total variable costs
€372,000
Fixed costs Depreciation €64,000 Supervision
30,000 Cashier
16,000
Total fixed costs €110,000
2 Variable costs per carper car Total costs estimated for 90,000 cars = €110,000 + (€4.65
× 90,000) = €528,500.
Bhimani, Horngren, Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
3 Average cost in 2010 =
372, 000 110, 000 482, 000 80, 000 80, 000
=
€
+ €
€
= €6.025 Average cost in 2011 =
528,500 90, 000
€
= €5.87 Some students may assume that power costs of running the continuously moving conveyor belt is a fixed cost. In this case the variable costs in 2010 will be €300,000 and the fixed costs be €182,000. The variable costs per car in 2010 = €300,000 ÷ 80,000 cars = €3.75 per car. Total costs for 90,000 cars in 2011 = €182,000 + (€3.75 × 90,000) = €519,500. The average cost of washing a car in 2011 = €519,500 ÷ 90,000 = €5.77.
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