Variable costs are costs that are not fixed and vary concerning some underlying activity. In any business, some expenses are fixed and some vary concerning sales or production. Building rent is fixed for a whole month but the electricity bill is variable as more units the business consumes the more will be the amount of expense.
Assume that a bakery has a building rent of $500 a month, the gas charges are $2 per unit of production. In June, July and August the bakery produced 300, 200 and 400 loaves of bread respectively. The variable cost will be changing with several loaves of bread produced. As the gas is a variable expense the variable costs and total costs will be as follows:
|
MONTH |
JUNE |
JULY |
AUGUST |
|
PRODUCTION |
300 |
200 |
400 |
|
Variable Cost ($2 PER BREAD) |
600 |
400 |
800 |
|
Fixed Cost ($500 PER MONTH) |
500 |
500 |
500 |
|
Total Cost |
1100 |
900 |
1300 |
Magic Realm, Inc., has developed a new fantasy board game
Lynch Company manufactures and sells a single product. The following costs
Chuck Wagon Grills, Inc., makes a single product—a
Mason Paper Company (MPC) manufactures commodity grade papers for use
Birch Company normally produces and sells 30,000 units of RG
Tasman Products, Ltd., of Australia has a Maintenance Department that
Weller Industries is a decentralized organization with six divisions. The company’s
Neptune Company produces toys and other items for use in beach and
Morton Company’s contribution format income statement for last month is given below
Vandalay Industries is considering the purchase of a new machine for the
