Question 1

The slope of the cost line on a scattergraph represents:

Accepted Answer

A)   fixed cost per unit.
B)   total fixed cost.
C)   variable cost per unit.
D)   sales price per unit.E) B) and D)
F) None of the above

Question 2

McNeil uses the high-low method of estimating costs. McNeil had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. What would McNeil estimate its total cost to be if sales equaled 8,000 units?

Accepted Answer

A)   $32,000
B)   $52,000
C)   $62,000
D)   $80,000E) None of the above
F) B) and D)

Question 3

Cost behavior is:

Accepted Answer

A)   the way in which costs change when the activity level changes.
B)   the difference between sales revenue and fixed costs.
C)   the same as absorption costing.
D)   the amount of sales necessary to achieve a specific profit.E) A) and C)
F) A) and D)

Question 4

Which of the following is a fixed cost?

Accepted Answer

A)   A cost that is $28.00 per unit when production is 70,000, and $28.00 per unit when production is 112,000.
B)   A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit when production is 112,000.
C)   A cost that is $28.00 per unit when production is 70,000, and $56.00 per unit when production is 112,000.
D)   A cost that is $56.00 per unit when production is 70,000, and $56.00 per unit when production is 112,000.E) A) and B)
F) C) and D)

Question 5

The relevant range is:

Accepted Answer

A)   the range in which costs remain variable.
B)   the range of activity over which we expect our assumptions about cost behavior to hold true.
C)   the range of activity based on the volume-based cost driver.
D)   the range in which costs remain fixeD.The relevant range is the range of activity over which we expect our assumptions about cost behavior to hold true.E) B) and C)
F) A) and D)

Question 6

The contribution margin ratio is calculated as total contribution margin divided by total sales revenue

Accepted Answer

A) True 
 B)False

Question 7

A graph of that provides a visual representation of the relationship between total cost and activity level is called a:

Accepted Answer

A)   relevant range.
B)   scattergraph.
C)   contribution margin graph.
D)   dependent variable.E) A) and B)
F) A) and C)

Question 8

Which of the following is not correct about "R Square" in regression analysis?

Accepted Answer

A)   R Square is a measure of "goodness of fit" of the model.
B)   An R Square value of 1.0 indicates a perfect fit of the model.
C)   R Square explains how much of the variability in x is explained by y.
D)   R Square explains how much of the variability in y is explained by x.E) None of the above
F) A) and B)

Question 9

Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. Ajax would estimate fixed costs as:

Accepted Answer

A)   $28,000
B)   $30,000
C)   $64,000
D)   $128,000E) None of the above
F) A) and B)

Question 10

Island Enterprises has presented the following information for the past eight months operations:  a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.
b. What would total costs be for a month with 3,000 units produced?

Accepted Answer

a. High month: September; low month: Jun...

Question 11

If a scattergraph contains points that do not fall in a perfect line:

Accepted Answer

A)   the relationship between the variables is not good enough to warrant fitting a line to the data.
B)   this is an indication that there is no relationship whatsoever between the variables.
C)   the visual fit method and high-low methods should not be used, but least-squares regression can be used.
D)   a straight line can still be used to approximate the relationship if a general linear trend can be discerneD.A straight line may still be used to approximate the relationship if a general linear trend is discerneD.The relationship need not be perfect to approximate a relationship, as long as there is a general linear trenD.E) A) and B)
F) A) and C)

Question 12

Lark, which uses the high-low method, had total costs of $25,000 at its lowest level of activity when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $39,000. Lark would estimate fixed costs as:

Accepted Answer

A)   $14,000
B)   $15,000
C)   $32,000
D)   $60,000E) B) and D)
F) B) and C) B

Question 13

Silver Products has presented the following information for the past eight months operations:  a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.
b. What would total costs be for a month with 5,000 units produced?

Accepted Answer

a. High month: September; low month: Jun...

Question 14

Paige Inc has the following information for its first year of operations:  a. Prepare Paige's full absorption costing income statement.
b. Prepare Paige's variable costing income statement.

Accepted Answer

a.  (Cost of goods sold per unit = $25 + $10 + $20 + ($64,000/2,000) = $87)
b.  (Variable cost per unit = $25 + $10 + $20 + $10 = $65)

Question 15

Sparrow, Inc. used the high-low method to estimate that its fixed costs are $105,000. At its low level of activity, 50,000 units, average cost was $2.60 per unit. What would Sparrow predict as its variable cost per unit?

Accepted Answer

A)   $0.50
B)   $1.55
C)   $2.10
D)   $2.60E) All of the above
F) A) and B)

Question 16

Palm, which uses the high-low method, had an average cost per unit of $50 at its lowest level of activity when sales equaled 1,000 units and an average cost per unit of $32.50 at its highest level of activity when sales equaled 2,000 units. Palm would estimate fixed costs as:

Accepted Answer

A)   $30.00
B)   $82.50
C)   $17,500
D)   $35,000E) B) and D)
F) None of the above

Question 17

A step cost:

Accepted Answer

A)   is a fixed cost over the relevant range and a variable cost everywhere else.
B)   contains both fixed and variable components.
C)   increases in direct proportion to changes in activity.
D)   is fixed over some range of activity.E) All of the above
F) A) and B) D

Question 18

The unit contribution margin tells how much each additional unit sold will contribute to covering variable costs

Accepted Answer

A) True 
 B)False

Question 19

Bronze Products has presented the following information for the past eight months operations:  a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.
b. What would total costs be for a month with 5,000 units produced?

Accepted Answer

a. High month: September; low month: Jun...

Question 20

The high-low method provides a reasonable estimate of the fixed and variable costs as long as:

Accepted Answer

A)   it uses eight or more points (instead of simply two) .
B)   at least one of the two points falls within the relevant range.
C)   the high and low points for both activity and total fixed costs are the same.
D)   the high and low points reflect the general trend of the data.E) B) and D)
F) B) and C)

Exam 5: Cost Behavior and Estimation

The slope of the cost line on a scattergraph represents:

Correct Answer
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Cost behavior is:

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Which of the following is a fixed cost?

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The relevant range is:

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The contribution margin ratio is calculated as total contribution margin divided by total sales revenue

Correct Answer
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A graph of that provides a visual representation of the relationship between total cost and activity level is called a:

Correct Answer
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Which of the following is not correct about "R Square" in regression analysis?

Correct Answer
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Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. Ajax would estimate fixed costs as:

Correct Answer
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Island Enterprises has presented the following information for the past eight months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 3,000 units produced?

Correct Answer
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a. High month: September; low month: Jun...
View Answer

If a scattergraph contains points that do not fall in a perfect line:

Correct Answer
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Lark, which uses the high-low method, had total costs of $25,000 at its lowest level of activity when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $39,000. Lark would estimate fixed costs as:

Correct Answer
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B

Silver Products has presented the following information for the past eight months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 5,000 units produced?

Correct Answer
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a. High month: September; low month: Jun...
View Answer

Paige Inc has the following information for its first year of operations: a. Prepare Paige's full absorption costing income statement. b. Prepare Paige's variable costing income statement.

Correct Answer
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a. 11eac1bc_0287_adb9_a502_8bdc7d31aa4f_TB2629_00 (Cost of goods sold per unit = $25 + $10 + $20 + ($64,000/2,000) = $87) b. 11eac1bc_0287_d4ca_a502_bf0d612af6e4_TB2629_00 (Variable cost per unit = $25 + $10 + $20 + $10 = $65)

Sparrow, Inc. used the high-low method to estimate that its fixed costs are $105,000. At its low level of activity, 50,000 units, average cost was $2.60 per unit. What would Sparrow predict as its variable cost per unit?

Correct Answer
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Palm, which uses the high-low method, had an average cost per unit of $50 at its lowest level of activity when sales equaled 1,000 units and an average cost per unit of $32.50 at its highest level of activity when sales equaled 2,000 units. Palm would estimate fixed costs as:

Correct Answer
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A step cost:

Correct Answer
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D

The unit contribution margin tells how much each additional unit sold will contribute to covering variable costs

Correct Answer
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Bronze Products has presented the following information for the past eight months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 5,000 units produced?

Correct Answer
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a. High month: September; low month: Jun...
View Answer

The high-low method provides a reasonable estimate of the fixed and variable costs as long as:

Correct Answer
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Exam 5: Cost Behavior and Estimation

The slope of the cost line on a scattergraph represents:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cost behavior is:

Correct AnswerverifiedShow Answer

Which of the following is a fixed cost?

Correct AnswerverifiedShow Answer

The relevant range is:

Correct AnswerverifiedShow Answer

The contribution margin ratio is calculated as total contribution margin divided by total sales revenue

Correct AnswerverifiedShow Answer

A graph of that provides a visual representation of the relationship between total cost and activity level is called a:

Correct AnswerverifiedShow Answer

Which of the following is not correct about "R Square" in regression analysis?

Correct AnswerverifiedShow Answer

Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. Ajax would estimate fixed costs as:

Correct AnswerverifiedShow Answer

Island Enterprises has presented the following information for the past eight months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 3,000 units produced?

Correct Answerverifieda. High month: September; low month: Jun...View AnswerShow Answer

If a scattergraph contains points that do not fall in a perfect line:

Correct AnswerverifiedShow Answer

Lark, which uses the high-low method, had total costs of $25,000 at its lowest level of activity when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $39,000. Lark would estimate fixed costs as:

Correct AnswerverifiedB

Silver Products has presented the following information for the past eight months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 5,000 units produced?

Correct Answerverifieda. High month: September; low month: Jun...View AnswerShow Answer

Paige Inc has the following information for its first year of operations: a. Prepare Paige's full absorption costing income statement. b. Prepare Paige's variable costing income statement.

Correct Answerverifieda. 11eac1bc_0287_adb9_a502_8bdc7d31aa4f_TB2629_00 (Cost of goods sold per unit = $25 + $10 + $20 + ($64,000/2,000) = $87) b. 11eac1bc_0287_d4ca_a502_bf0d612af6e4_TB2629_00 (Variable cost per unit = $25 + $10 + $20 + $10 = $65)

Sparrow, Inc. used the high-low method to estimate that its fixed costs are $105,000. At its low level of activity, 50,000 units, average cost was $2.60 per unit. What would Sparrow predict as its variable cost per unit?

Correct AnswerverifiedShow Answer

Palm, which uses the high-low method, had an average cost per unit of $50 at its lowest level of activity when sales equaled 1,000 units and an average cost per unit of $32.50 at its highest level of activity when sales equaled 2,000 units. Palm would estimate fixed costs as:

Correct AnswerverifiedShow Answer

A step cost:

Correct AnswerverifiedD

The unit contribution margin tells how much each additional unit sold will contribute to covering variable costs

Correct AnswerverifiedShow Answer

Bronze Products has presented the following information for the past eight months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 5,000 units produced?

Correct Answerverifieda. High month: September; low month: Jun...View AnswerShow Answer

The high-low method provides a reasonable estimate of the fixed and variable costs as long as:

Correct AnswerverifiedShow Answer

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a. High month: September; low month: Jun...
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B

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a. High month: September; low month: Jun...
View Answer

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a. 11eac1bc_0287_adb9_a502_8bdc7d31aa4f_TB2629_00 (Cost of goods sold per unit = $25 + $10 + $20 + ($64,000/2,000) = $87) b. 11eac1bc_0287_d4ca_a502_bf0d612af6e4_TB2629_00 (Variable cost per unit = $25 + $10 + $20 + $10 = $65)

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D

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a. High month: September; low month: Jun...
View Answer

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