Accounting & Bookkeeping & Small Business Forum

[Guest]

hmmm....i am working on some accounting homework and im kinda stuck

The San Fernando Herald has determined that the annual printing of 600,00 newspapers costs 9 cents per copy. If production were to increase to 900,000 copies per year, the per-unit cost would drop to 7 cents per copy.

1. Determine the total fixed and variable costs for printing 600,000 newspapers

.....would the fixed and variable costs be the same? or would it just be variable because the 7 cents changes according to how many units are produced?

[Guest]

When a cost appears to have both a fixed & a
variable component, they are called mixed costs.
There are several ways to break them out but the
simplest is the Hi/Lo approach.1)Determine your
Hi/Lo point of activity.(In this case 900,000
and 600,000)2)Divide the change in cost by the
change in activity - giving you VC per unit.(Here the change in cost is 9,000, so we divide 9,000
by 300,000 giving us a VC of .03 per unit) 3)Multiply the Hi or Lo point of activity by the
Variable Cost per unit.(600,000 x .03 = 18,000)
This is your variable cost.4)Subtract the total
variable cost from the total cost.(600K x .09
=54,000 less the 18,000 vc leaves a Fixed Cost
of 36,000)Hope this helps. Lisa

[Guest]

thank you i really appriciate it ....:)