Question:
Classification of costs, manufacturing sector. The Fremont, California, plant of New United Motor Manufacturing, Inc. (NUMMI), a joint venture of General Motors and Toyota, assembles two types of cars (Corollas and Geo Prisms). Separate assembly lines are used for each type of car.
Classify each cost item (A-H) as follows: Required
a. Direct or indirect (D or I) costs with respect to the total number of cars of each type assembled (Corolla or Geo Prism).
b. Variable or fixed (V or F) costs with respect to how the total costs of the plant change as the total number of cars of each type assembled changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of cars of each type assembled.)
You will have two answers (D or I; V or F) for each of the following items:
Required
1. Draw a graph of the total monthly costs of the three plans for different levels of monthly long-distance calling.
2. Which plan should Ashton choose if she expects to make 100 minutes of long-distance calls? 240 minutes? 540 minutes?