A chain of convenience stores has one manager per store who is paid a monthly salary. Relative to the number of stores, is the manager’s salary fixed or variable? Why?
The manager’s salary is a variable cost.
The cost which is function of other variable is known as variable cost
The manager’s salary is a variable cost because the salary of manager is dependent upon the number of stores. If the number of stores increase or decrease the manager’s salary will also change, therefore manager salary is variable.
Question: Gilbert’s Steel Parts produces parts for the automobile industry. The company has monthly fixed costs of $640,220 and a contribution margin of 85% of revenues.
1. Compute Gilbert’s monthly breakeven sales in dollars. Use the contribution margin ratio approach.
2. Use contribution margin income statements to compute Gilbert’s monthly operating income or operating loss if revenues are $500,000 and if they are $1,050,000.
3. Do the results in Requirement 2 make sense given the breakeven sales you computed in Requirement 1? Explain.
Question: Use the following information to complete Short Exercises S20-10 through S20-15.
Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at $70 per person as a one-day entrance fee. Variable costs are $42 per person, and fixed costs are $170,800 per month.
Compute Funday Park’s contribution margin ratio. Carry your computation to two decimal places. Use the contribution margin ratio approach to determine the sales revenue Funday Park needs to break even
Following is a list of costs for a furniture manufacturer that specializes in wood tables. Classify each cost as variable, fixed, or mixed relative to the number of tables produced and sold.
1. Wood used to build tables
2. Depreciation on saws and other manufacturing equipment
3. Compensation for sales representatives paid on a salary plus commission basis
4. Supervisor’s salary
5. Wages of production workers
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