Chapter 2, Problem 30E

To determine

Calculate the missing amounts in the table.

Explanation of Solution

Variable cost: variable cost is the cost that changes according to the production of goods.

Fixed cost: Fixed cost is the cost that does not change in short term even if the production of goods changes.

Calculate the missing amounts.

Particulars	Number of Muffler replacements
	500	600	700
Total costs:
Fixed cost	$42,000 (a)	$42,000	$42,000 (a)
Variable cost	25,000 (c)	30,000	35,000 (d)
Total cost	$67,000 (e)	$72,000	$72,000 (f)
Cost per muffler replacement:
Fixed cost	$84 (g)	$70 (h)	$60 (i)
Variable cost	50 (j)	50 (k)	50 (l)
Total cost per muffler replacement	$134 (m)	$120 (n)	$110 (o)

Table (1)

Working notes:

1. a) Fixed cost does not vary according to the activity. Therefore, fixed cost for 500 numbers are $42,000.
2. b) Fixed cost does not vary according to the activity. Therefore, fixed cost for 700 numbers are $42,000.
3. c) Calculate the variable cost for 500 numbers of replacements.

$\begin{array}{c}\text{Variable cost per replacement = Total variable cost}÷\text{Number of replacement}\\ \text{=\$30,000}÷\text{600}\\ \text{=\$50}\end{array}$

$\begin{array}{c}\begin{array}{l}\text{Variable cost for 500 }\\ \text{number of replacement}\end{array})\text{= Variable cost per replacement}\times \text{Number of replacement}\\ \text{=\$50}\times \text{500}\\ \text{=\$25,000}\end{array}$

1. d) Calculate the total variable cost for 700 numbers of replacements.

   $\begin{array}{c}\begin{array}{l}\text{Variable cost for 700 }\\ \text{number of replacement}\end{array})\text{= Variable cost per replacement}\times \text{Number of replacement}\\ \text{=\$50}\times 7\text{00}\\ \text{=\$35,000}\end{array}$

2. e) Calculate the total cost for 500 numbers of replacements.

   $\begin{array}{c}\text{Total cost for 500 replacements = Total fixed cost + Total variable cost}\\ \text{=\$42,000+\$25,000}\\ \text{=\$67,000}\end{array}$

3. f) Calculate the total cost for 700 numbers of replacements.

   $\begin{array}{c}\text{Total cost for 700 replacements = Total fixed cost + Total variable cost}\\ \text{=\$42,000+\$35,000}\\ \text{=\$77,000}\end{array}$

4. g) Calculate the fixed cost per replacement for 500 numbers.

   $\begin{array}{c}\text{Fixed cost per replacement = Total fixed cost}÷\text{Number of replacement}\\ \text{=\$42,000}÷500\\ \text{=\$84}\end{array}$

5. h) Calculate the fixed cost per replacement for 600 numbers.

   $\begin{array}{c}\text{Fixed cost per replacement = Total fixed cost}÷\text{Number of replacement}\\ \text{=\$42,000}÷600\\ \text{=\$70}\end{array}$

6. i) Calculate the fixed cost per replacement for 700 numbers.

   $\begin{array}{c}\text{Fixed cost per replacement = Total fixed cost}÷\text{Number of replacement}\\ \text{=\$42,000}÷700\\ \text{=\$60}\end{array}$

7. j) Calculate the Variable cost per replacement for 500 numbers.

   $\begin{array}{c}\text{Variable cost per replacement = Total variable cost}÷\text{Number of replacement}\\ \text{=\$25,000}÷500\\ \text{=\$50}\end{array}$

8. k) Calculate the variable cost per replacement for 600 numbers.

   $\begin{array}{c}\text{Variable cost per replacement = Total variable cost}÷\text{Number of replacement}\\ \text{=\$30,000}÷600\\ \text{=\$50}\end{array}$

9. l) Calculate the variable cost per replacement for 700 numbers.

$\begin{array}{c}\text{Variable cost per replacement = Total variable cost}÷\text{Number of replacement}\\ \text{=\$35,000}÷700\\ \text{=\$50}\end{array}$

1. m) Calculate the total cost per replacement for 500 numbers.

   $\begin{array}{c}\begin{array}{l}\text{Total cost per replacement}\\ \text{for 500 numbers}\end{array})\text{ = }\left(\begin{array}{c}\text{Total fixed cost per replacement }\\ \text{+ Total variable cost per replacement}\end{array}\right)\\ \text{=\$84+\$50}\\ \text{=\$134}\end{array}$

2. n) Calculate the total cost per replacement for 600 numbers.

   $\begin{array}{c}\begin{array}{l}\text{Total cost per replacement}\\ \text{for 600 numbers}\end{array})\text{ = }\left(\begin{array}{c}\text{Total fixed cost per replacement }\\ \text{+ Total variable cost per replacement}\end{array}\right)\\ \text{=\$70+\$50}\\ \text{=\$120}\end{array}$

3. o) Calculate the total cost per replacement for 700 numbers.

$\begin{array}{c}\begin{array}{l}\text{Total cost per replacement}\\ \text{for 700 numbers}\end{array})\text{ = }\left(\begin{array}{c}\text{Total fixed cost per replacement }\\ \text{+ Total variable cost per replacement}\end{array}\right)\\ \text{=\$60+\$50}\\ \text{=\$110}\end{array}$