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Cost Analysis and Financial Decisions

9. How do variable costs and fixed costs differ? Give an example of each.

10. Analyze your personal expenses on a variable and fixed basis. What are some of your personal fixed costs and variable costs? What would cause them to change?

11. What is C-V-P analysis used for? In the process of using C-V-P analysis, what does it mean to "break even"?

17. What is the difference between a direct cost and an indirect cost? Give an example of each in the context of teaching an accounting class at your school.

19. How can out-of-pocket costs and opportunity costs be applied to your personal financial decisions?

Solution Preview

9. How do variable costs and fixed costs differ? Give an example of each.
Fixed costs are those that do not depend on the number of units produced in the short run, for example the cost of buying the factory building, machinery etc. Variable costs are those that depend on the number of units produced, for example the number of widgets produced in the rented factory building using the machinery.

10. Analyze your personal expenses on a variable and fixed basis. What are some of your personal fixed costs and variable costs? What would cause them to change?
I recently bought a printer. The cost of the printer equipment itself was $250, which is fixed cost as it remains invariable whether I print 1 page or 100 pages. However, each A4 sheet that it prints costs $0.21. ...

Solution Summary

This solution provides answers to various questions regarding cost analysis and financial decisions. Topics covered include: CVP analysis, variable and fixed costs, personal expenses, direct and indirect costs, and out-of-pocket costs.

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