Costs and Coffee Average Cost

Topics: Costs, Fixed cost, Variable cost Pages: 3 (597 words) Published: May 23, 2013
Exercise 2-2
Classify each cost listed below as either a product cost or a period cost for purposes of preparing the financial statements for the bank. 1. The cost of the memory chips used in radar set.
* Product Cost
2. Factory Heating Cost
* Period Cost
3. Factory Equipment maintenance costs.
* Period Cost
4. Training costs for new administrative employees
* Period Costs
5. The cost of the solder that is used in assembling the radar sets. * Product costs
6. The Travel Costs of the company’s salespersons
* Product Cost
7. Wages and salaries of factory security personel
* Period Cost
8. The Cost of air-conditioning executive offices
* Period cost
9. Wages and Salaries in the department that handles billing customers * Period cost
10. Depreciation on the equipment in the fitness room used by factory workers. * Product Cost
11. Telephone Expenses incurered by factory management
* Product Cost
12. The cost of shipping completed radar sets to customers * Product Cost
13. The Wages of workers who assemble the radar sets
* Period Costs
14. The President’s Salary
* Period Cost
15. Health Insurance Premiums for Factory personell
* Period Cost

Exercise 2-3
Koffee Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.26. Required:

1. Fill in the following table with your estimates of total costs and average cost per cup of coffee at the indicated levels of activity for a coffee stand. Round off the cost of a cup of coffee to the nearest tenth of a cent.

| Cups of Coffee Served in a Week|
| 1,800| 1,900| 2,000|
Fixed Cost| $1,100| $1,100| $1,100|
Variable Cost| $0.26| $0.26| $0.26|
Total Cost| $1568| $1594| $1620|
Average cost per cup of coffee served| 0.871| 0.839| 0.810|

We know, Y =...
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