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Identify each of the following costs in terms of its cost behavior-variable, fixed, mixed, or...

Question:

Identify each of the following costs in terms of its cost behavior-variable, fixed, mixed, or step.

a. The cost of coffee beans at a Starbucks shop

b. Depreciation of airplanes at Southwest Airlines

c. Nurses' wages at M. D. Anderson Cancer Center, assuming a ratio of one nurse to every five patients

d. Electricity cost at a Krispy Kreme Doughnuts store

e. The cost of hard drives installed in computers built by Dell

f. Store managers' salaries at Barnes and Noble bookstores

g. Actors' wages and salaries at Paramount Studios, when the star is paid a base amount plus a percentage of box office receipts

h. The cost of fabric used in making shirts at Lands' End

i. The cost of cookies provided to guests at check -in at Doubletree Hotels

j. The cost of a national advertising campaign for Burger King

Fixed Versus Variable Costs:

Companies will incur both fixed and variable costs during a given reporting period. Fixed costs do not change based on the output produced (e.g. rent), while variable costs will change based on the output (e.g. direct materials)

Answer and Explanation: 1

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a. The cost of coffee beans at a Starbucks shop - Variable

b. Depreciation of airplanes at Southwest Airlines - Fixed (fixed cost per period)

c....

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Fixed Costs: Definition, Formula & Examples

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Chapter 3 / Lesson 14
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What is a fixed cost? Learn the fixed cost definition and how to calculate it using the fixed cost formula. Compare fixed vs. variable costs and see fixed costs examples in business.


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