【正文】 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Utilization of a Constrained Resource ?Firms often face the problem of deciding how to best utilize a constrained resource. ?Usually, fixed costs are not affected by this particular decision, so management can focus on maximizing total contribution margin. 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Identifying Relevant Costs Costs that can be eliminated (in whole or in part) by choosing one alternative over another are avoidable costs. Avoidable costs are relevant costs. Unavoidable costs are never relevant and include: ?Sunk costs. ?Future costs that do not differ between the alternatives. 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill The Scattergraph Method Estimated fixed cost = $10,000 0 1 2 3 4 * Total Cost in 1,000’s of Dollars 10 20 0 * * * * * * * * * Activity, 1,000’s of Units Produced X Y The slope of this line is the variable unit cost. (Slope is the change in total cost for a one unit change in activity). 169。 4,000 units = $ per unit ? Fixed cost = Total cost – Total variable cost Fixed cost = $9,700 – ($ per unit 9,000 units) Fixed cost = $9,700 – $8,100 = $1,600 ? Total cost = Fixed cost + Variable cost (Y = a + bX) Y = $1,600 + $ U ni t s C os tH i gh a c t i v i t y l e v e l 9 , 0 0 0 9 , 7 0 0$ Low a c t i v i t y l e v e l 5 , 0 0 0 6 , 1 0 0 C ha nge 4 , 0 0 0 3 , 6 0 0$ The HighLow Method 169。 ? the fixed cost。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill A mixed cost has both fixed and variable ponents. Mixed Costs Consider the following electric utility example. 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill The Linearity Assumption and the Relevant Range Activity Total Cost Economist’s Curvilinear Cost Function 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Variable Cost Per Unit Minutes Talked Per Minute Telephone Charge The cost per long distance minute talked is constant. For example, 10 cents per minute. 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Direct Materials Those materials that bee an integral part of the product and that can be conveniently traced directly to it. Example: A radio installed in an automobile 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Direct Labor Those labor costs that can be easily traced to individual units of product. Example: Wages paid to automobile assembly workers 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Total Fixed Cost Your monthly basic telephone bill probably does not change when you make more local calls. Number of Local Calls Monthly Basic Telephone Bill 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Activity Total Cost Economist’s Curvilinear Cost Function Accountant’s StraightLine Approximation (constant unit variable cost) The Linearity Assumption and the Relevant Range 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill Fixed Monthly Utility Charge Variable Utility Charge Activity (Kilowatt Hours) Total Utility Cost Mixed Costs X Y 169。 and then ? express the costs in equation form Y = a + bX. The HighLow Method U ni t s C os tH i gh a c t i v i t y l e v e l 9 , 0 0 0 9 , 7 0 0$ Low a c t i v i t y l e v e l 5 , 0 0 0 6 , 1 0 0 C ha nge 4 , 0 0 0 3 , 6 0 0$ 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill If sales salaries and missions are $10,000 when 80,000 units are sold and $14,000 when 120,000 units are sold, what is the variable portion of sales salaries and mission? a. $ per unit b. $ per unit c. $ per unit d. $ per unit The HighLow Method 169。 The McGrawHill Companies, Inc., 2023 Irwin/McGrawHill The Scattergraph Method Slope = Change in cost Change in units Horizontal distance is the change in activity. 0 1 2 3 4 * Total Cost in 1,000’s of Dollars 10 20 0 * * * * * * * * * Activity, 1,000’s of Units Produced X Y Vertical distance is the change in cost. 169。 The McGrawHill Companies, I