Purchase Solution

Fixed; Variable and Semivariable Costs

Not what you're looking for?

Ask Custom Question

Valley Meat Company produces one of the best sausage products in Pennsylvania. The company's controller compiled the following information by analyzing the accounting records:

1. Meat costs the company $2.80 per pound of sausage produced.
2. Compensation of production employees is $2.00 per pound of sausage produced.
3. Supervisory salaries total $19,000 per month.
4. The company incurs utility costs of $8,000 per month plus $0.50 per pound of sausage produced.
5. Insurance and property taxes average $7,000 per month.

Required:
A. Classify each cost as variable, fixed, or semivariable.
B. Write a cost formula to express the cost behavior of the firm's production costs. (Use the form Y = a + bX, where X denotes the quantity of sausage produced.)

I am having a tough time getting the formula to match my numbers

Purchase this Solution

Solution Preview

Part A.
Variable costs: Whose Total cost increases in proportion of quantity produced. However, the avarage cost per unit produced remains same.
- Meat cost
-Employee compensation

Fixed cost: Whose Total cost remains constant for any quantity ...

Purchase this Solution


Free BrainMass Quizzes
Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.