Costs can be classified into two categories, fixed and variable costs. Identify which cost item (listed in question) is fixed and variable and why...
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Costs can be classified into two categories, fixed and variable costs. These costs behave differently based on the level of sales volumes. Suppose we are running a restaurant and have identified certain costs along with the number of annual units sold of 1000.
Item: Raw Materials (cost for hamburgers)
Total Annual Cost: 650
Item: Building Rent
Total Annual Cost: 9000
Identify which cost item above is fixed and variable and why. What is the cost per unit of each? Suppose we increased our sales volume to 6000 units and then to 8000 units the following year (and are still within the relevant range), what would be the total annual cost and unit cost of fixed and variable costs?
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Identify which cost item above is fixed and variable and why?
The Raw Materials cost of 650 is variable cost, and the Building Rent Cost of 9000 is fixed cost.
What is the cost per unit of each?
The unit ...
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