Ag Decision Maker Activity
Managerial Costs
File C5-209
Name ________________________
Using File C5-209, answer the questions below.
1) Managerial costs are used for:
A)
B)
C)
D)
Decision maker
Traditional accounting
Preparation of past performance reports
All of the above
2) Match the description with the type of cost it represents:
A) A portion of the cost increases directly with the level of output while the
remaining portion does not change __________ (semi)
B) The amount of cost is directly related to the amount of output __________
(variable)
C) Costs that are not absolutely necessary for the operation of the business
__________ (avoidable)
D) The amount of cost incurred by the business remains the same regardless of
the level of output __________ (fixed)
E) Costs that have already been incurred __________ (sunk)
F) The amount of cost is directly related to the level of output but just over a
certain range of output __________ (step)
G) Costs that are absolutely necessary for the operation of the business
__________ (unavoidable)
A)
B)
C)
D)
E)
F)
G)
Variable costs
Fixed costs
Semi-variable costs
Step-variable costs
Avoidable fixed costs
Unavoidable fixed costs
Sunk costs
3) You are a manufacturer of Widgets. Your costs are listed below







Rent (costs per month) = $6,000
Materials (cost per widget) = $3.00
Labor (cost per widget) = $2.00
Administration (cost per month) = $5,000
Marketing (cost per month) = $3,000
Energy cost (cost per widget) = $.50
Equipment depreciation (cost per month) $10,000
A) List the variable costs
Type
____________
____________
____________
____________
____________
Total
Amount
_______
_______
_______
_______
_______
_______
materials $3.00
labor $2.00
energy $.50
$5.50
B) List the fixed costs
Type
____________
____________
____________
____________
____________
Total
Amount
_______
_______
_______
_______
_______
_______
rent $6,000
admin $5,000
marketing $3,000
equip $10,000
C) Compute the net returns
 Sale price = $10.00
 Amount sold = 5,000
 Revenue __________ $50,000
 Variable cost __________ $27,500
 Fixed cost __________ $24,000
 Net return __________ ($1,500)
D) Computer the net returns
 Sale price = $12.00
 Amount sold = 6,000
 Revenue __________ $72,000
 Variable cost __________ $33,000
 Fixed cost __________ $24,000
 Net return __________ $15,000
$24,000