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marissaann
Feb 28, 2006, 02:37 PM
I am currently in managerial accounting and if anyone could be of help, I'd really appreciate it... here are some problems I have no clue how to solve:

Shipping costs at Fisheries Inc. are a mixed cost with a variable and fixed cost components. Records indicate the company shipped 6000 tons of halibut for $5000 in March and 9000 tons for $7400 in April. Assuming that this activity is within the relevant range, the expected shipping cost for shipping 7800 tons would be:

Thanks so much!

CaptainForest
Feb 28, 2006, 06:07 PM
6,000 tons = $5,000
9,000 tons = $7,400

Price made up of FC and VC/ton

3,000 extra tons (9,000tons-6,000tons) cost an ADDITIONAL $2,400 ($7,400-$5,000)

So, VC on 3,000 tons is $2,400
VC/ton = $2,400/3,000 = $0.80

On the 6,000 ton order:
VC = 6,000 x $0.80 = $4,800
They chargred $5,000
So, FC must be $200 (5,000-4,800)

Check the 9,000 order to be sure
FC = 200
VC = 9,000 x 0.80 = $7,200
Total = 200 + 7,200 = $7,400 (that is what was charged)

Therefore, this question asks the total cost on an order of 7,800 tons:
FC = $200
VC = 7,800 tons x $0.80 = $6,240
Total Shipping Costs on 7,800 tons = $6,440