Reference no: EM132669121

Allison looked at her telephone bill with dismay. After leaving her job last year to become a self-employed consultant, her phone charges had grown considerably. She called her current provider and asked how she could obtain a lower rate. The service representative suggested that Allison buy the following phone plan. Up to 500 minutes of phone calls for a flat fee of $20 per month. No refunds would be provided for usage less than 500 minutes per month. Any minutes over 500 per month would be billed at 10c per minute. No service change fee or cancellation fee would apply.

Required:

Problem 1. What is the cost driver for Allison's telephone costs, assuming that the cost object is her consulting business?

Problem 2. In the proposed service plan, which of the costs are fixed and which are variable? Explain.