Cost Behavior in Real Companies
Response to the following problem:
Choose a company with which you are familiar that manufactures a product or provides a service. In this activity, you will be making reasonable estimates of the costs and activities associated with this company; companies do not typically publish internal cost or process information.
Basic Discussion Questions
1. Describe the company you selected and the products or services it provides.
2. List ten costs that this company would incur. Include costs from a variety of departments within the company, including human resources, sales, accounting, production (if a manufacturer), service (if a service company), and others. Make sure that you have at least one cost from each of the following categories: fixed, variable, and mixed.
3. Classify each of the costs you listed as either fixed, variable, or mixed. Justify why you classified each cost as you did.
4. Describe a potential cost driver for each of the variable and mixed costs you listed. Explain why each cost driver would be appropriate for its associated cost.
5. Discuss how easy or difficult it was for you to decide whether each cost was fixed, variable, or mixed. Describe techniques a company could use to determine whether a cost is fixed, variable, or mixed.