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Q1) Costs can be categorized into two categories, fixed and variable costs. These costs behave differently based on level of sales volumes. Assume we are running restaurant and have identified certain costs along with number of annual units sold of 1000.

Item: Raw Materials (cost for hamburgers)

Total Annual Cost: 650

Item: Building Rent

Total Annual Cost: 9000

Recognize which cost item above is fixed and variable and why? Determine the cost per unit of each? Assume we increased our sales volume to 6000 units and then to 8000 units the following year (and are still in the suitable range), what would be total annual cost and unit cost of fixed and variable costs?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919109

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