A4. Identify the following planned costs as (a)variable cost, (b)fixed costs, (c)mixed costs or (d)step costs and indicate likely driver. 1. Fixed cost. 2. Step cost 3. Variable cost, revenue. 4. Variable cost, miles. 5. Mixed cost, miles. 6. Fixed cost 7. Fixed cost 8. Fixed cost 9. Variable cost, advertising budget. 10. Fixed cost 11. Fixed cost 32. Fill in the blanks
Case 1 2 3 4 5
Selling Price/Unit ($) 26 10 21 30 14
Variable Cost Per Unit ($) 20 6 18 20 12
Units Sold 125,000 100,000 21,000 60,000 86,000
Total Contribution Margin 750,000 400,000 63,000 600,000 172,000
Total Fixed Cost
Net Income
675,000 320,000 49,000 588,000 125,000
0 80,000 14,000 12,000 47,000
Why do we care if a cost is variable or fixed? - Variable Costs A variable cost is a company's cost that is associated with the amount of goods or services it produces. A company's variable cost increases and decreases with the production volume. -Fixed Costs On the other hand, a fixed cost does not vary with the volume of production. A fixed cost does not change with the amount of goods or services a company produces. What is contribution margin and contribution margin ratio and how is it calculated? -Contribution margin (CM) = sale price per unit minus variable cost per unit -Contribution margin ratio is CM per unit /Sale Price Per Unit