Lancaster Meat Company produces one of the best sausage products in southeastern Pennsylvania. The company's controller used the account- classification method to compile the following information.
a. Depreciation schedules revealed that monthly depreciation on buildings and equipment is $ 21,000.
b. Inspection of several invoices from meat packers indicated that meat costs the company $ 1.20 per pound of sausage produced.
c. Wage records showed that compensation for production employees costs $. 85 per pound of sausage produced.
d. Payroll records showed that supervisory salaries total $ 11,000 per month.
e. Utility bills revealed that the company incurs utility costs of $ 5,000 per month plus $. 25 per pound of sausage produced.
Required:
1. Classify each cost item as variable, fixed, or semi-variable.
A.
B.
C.
D.
E.
2. Write a cost formula to express the cost behavior of the firm's production costs. (Use the form Y=a+bX, where Y denotes production cost and X denotes quantity of sausage produced.)