Exercise 11-11 Fixed versus variable cost behavior LO 11-1, 11-2 Moore Entertain

Question

Exercise 11-11 Fixed versus variable cost behavior LO 11-1, 11-2 Moore Entertainment sells souvenir T-shirts at each rock concert that it sponsors. The shirts cost S9 each. Any excess shirts cán be returned to the manufacturer for a full refund of the purchase price. The sales price is $15 per shirt. Required a. What are the total cost of shirts and cost per shirt if sales amount to 2,000, 2,500, 3,000, 3,500, or 4,000? Number of Shirts Sold Total cost of shirts Cost per shirt 2,000 2.500 | 3,000 3,500 4,000 b. Is the cost of T-shirts a fixed or a variable cost? Fixed cost Variable cost

Explanation / Answer

a)

The total cost of the shirts and cost per shirt is calculated in the following table

b)

The cost of T-shirts is a variable cost as it depends on the number of units required and is not fixed

Calculations A Number of shirts sold 2000 2500 3000 3500 4000 B = A x $9 Total cost of shirts 18000 22500 27000 31500 36000 C = B / A Cost per shirt 9 9 9 9 9

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