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Exercise 11-8 Fixed versus variable cost behavior Harrel Entertainment sells souvenir T-shirts at…

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Exercise 11-8     Fixed versus variable cost behavior

Harrel Entertainment sells souvenir T-shirts at each rock concert that it sponsors. The shirts cost

$9 each. Any excess shirts can 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?

b.     Is the cost of T-shirts a fixed or a variable cost?

c.     Draw a graph and plot total cost and cost per shirt if sales amount to 2,000, 2,500, 3,000, 3,500, or 4,000.

d.     Comment on Harrel’s likelihood of incurring a loss due to its operating activities.

 

 

Nov 10 2015 06:26 AM

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