Problem - Stella Company produces specialty tubing for large scale construction application. It's factory has six extruding lines that form tubing of different diameters. Each line can produce up to 5,000 feet of tubing per year. Each line has one supervisor who is paid $25,000 per year. Depreciation on equipment averages $12,000 per year. Direct materials and power cost about $2.50 per foot of tubing.
1. Prepare a graph for each of these three costs: equipment depreciation, supervisors' wage, and direct materials and power. Use the vertical axis for cost and the horizontal axis for feet of tubing. Assume that tubing sales range from 0 to 30,000 feet of tubing.
2. Assume that the normal operating range for the company is 26,000 to 29,000 feet of tubing per year. How would you classify each of the three types of cost?