Consider the Six Costs That Follow

question 60

Essay

Consider the six costs that follow.
1. Advertising and promotion costs of a do-it-yourself retailer
2. Surgical supplies used in a hospital's operating room
3. Aircraft depreciation charges of an airline
4. Utility charges that include a minimum-use fee, for a small business
5. Annual business licensing fee paid by a daycare centre
6. Truck fuel consumed by a road construction company
Required:
A. Classify each of these costs as variable, committed fixed, discretionary fixed, or semi-variable.
B. Briefly describe the behaviour of a per-unit variable cost as activity changes.
C. What elements are present in a semi-variable cost that cause it to behave in a semivariable manner?
D. Generally speaking, does management have more flexibility when dealing with committed fixed costs or discretionary fixed costs?

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Definitions:

Commitment

The state or quality of being dedicated to a cause, activity, or relationship, often demonstrated through consistent actions and investment over time.

Passionate Love

An intense, deep affection for someone that involves sexual attraction, emotional connection, and longing.

Decades

Periods of ten years, often used to measure time in a broad sense or to refer to specific historical or personal eras.

Passionate Love

An intense, emotional state of longing and desire often characterized by feelings of attraction, affection, and fantasy about a romantic partner.