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Fixed and variable costs

2. Reef office supplies is interested in estimating the cost involved in hiring new employees . The following information is available regarding the costs of operation the human resource department of reef office supplies in may when there were 60 new hires

May
Staff salaries 33000
Manager salary 8000
Office supplies 300
Depreciation of office equipment 400
Share of building cost(based on square feet occupied by HR 2000
Total 43700

a. Use account analysis to determine fixed cost per month and variable cost per new hire
b. The company is planning to hire 70 employees in June. Estimate the total cost of Human Resource in June
c. What is the expected incremental cost associated with hiring 10 employees than were hired in May?

Solution Preview

a. In account analysis we classify the costs as fixed or variable based on judgment. Of the the costs given, the variable costs would be
Staff salaries - vary with number of staff
Office ...

Solution Summary

The solution explains how to break the cost into its fixed and variable parts using account analysis method and then to calculate the incremental cost.

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