Q22E - Horngren'S Financial And Managerial Accounting

Question

Question: Determining total mixed cost 

John Street Barber Shop pays \(25 per month for water for the first 8,000 gallons and \)3.50 per thousand gallons above 8,000 gallons. Calculate the total water cost when the barber shop uses 7,000 gallons, 10,000 gallons, and 13,000 gallons.

Step-by-Step Solution

Answer

Answer

 

The total mixed cost for 7,000 gallons is $25 , for 10,000 gallons is $32 , 13,000 gallons is $42.5 .

 

Step 1: Calculation of total mixed cost for 7,000 gallons

	Amount
Payment for water for first 8,000	$25
Payment for water  @$3,50  per thousand gallons above 8,000 gallons.	$0
Total mixed cost	$25

Step 2: Calculation of total mixed cost for 10,000 gallons

	Amount
Payment for water for first 8,000	$25
Payment for water @$3,50  per thousand gallons above 8,000 gallons.	$\mathbf{\$}\mathbf{3}\mathbf{.}\mathbf{50}\mathbf{x}\mathbf{2}\mathbf{=}\mathbf{\$}\mathbf{7}$
Total mixed cost	$32

Step 3: Calculation of total mixed cost for 13,000 gallons

	Amount
Payment for water for first 8,000	$25
Payment for water  @$3,50 per thousand gallons above 8,000 gallons.	$\mathbf{\$}\mathbf{3}\mathbf{.}\mathbf{50}\mathbf{x}\mathbf{5}\mathbf{=}\mathbf{\$}\mathbf{17}\mathbf{.}\mathbf{5}$
Total mixed cost	$42.5