Question 1

A company's normal operating activity is to produce 500 units per month. During its first two months of operations, it produced 100 units per month. Following a great article about the product, product spiked to 1,000 units per month, but the spike only lasted for one month. Which of the following best approximates the company's relevant range?

Accepted Answer

A)   450 - 510 units
B)   100 - 1,000 units
C)   500 - 1,000 units
D)   100, 500, or 1,000 unitsE) All of the above
F) None of the above

Question 2

A scattergraph is useful in recognizing unusual patterns in the cost data

Accepted Answer

A) True 
 B)False

Question 3

Knox Corp. has a selling price of $20, variable costs of $14 per unit, and fixed costs of $25,000. If Knox sells 12,000 units, the contribution margin ratio will equal:

Accepted Answer

A)   $60,000
B)   30%
C)   70%
D)  10.4% E) B) and C)
F) A) and C)

Question 4

Which of the following is the correct equation for total mixed costs under the linearity assumption?

Accepted Answer

A)   Total Fixed Costs + (Variable Cost per Unit × Units of Activity) 
B)   Total Variable Costs + (Fixed Cost per Unit × Units of Activity) 
C)   (Total Fixed Costs × Units of Activity)  + Total Variable Costs
D)   (Total Fixed Costs × Units of Activity)  + (Total Variable Costs × Units of Activity) E) A) and D)
F) All of the above

Question 5

Winston uses the high-low method. It had an average cost per unit of $10 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $6.50 at its highest level of activity when sales equaled 20,000 units. What would Winston estimate its total cost to be if sales equaled 8,000 units?

Accepted Answer

A)   $24,000
B)   $52,000
C)   $70,000
D)   $94,000E) B) and D)
F) None of the above

Question 6

Meadow uses the high-low method. It had total costs of $500,000 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 $780,000. Meadow would estimate fixed costs as:

Accepted Answer

A)   $280,000
B)   $300,000
C)   $640,000
D)   $1,200,000E) All of the above
F) B) and D)

Question 7

Newport, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:   a. What is Newport's total fixed cost?
b. What is Newport's variable cost per unit?
c. What total cost would Newport predict for a month in which they sold 5,000 units?
d. What proportion of variation in Newport's cost is explained by variation in production?

Accepted Answer

a. $38,000
b. $5.75
...

Exam 5: Cost Behavior and Estimation

Correct Answer
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Correct Answer
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Which of the following is the correct equation for total mixed costs under the linearity assumption?

Correct Answer
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Meadow uses the high-low method. It had total costs of $500,000 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 $780,000. Meadow would estimate fixed costs as:

Correct Answer
verified

A scattergraph is useful in recognizing unusual patterns in the cost data

Correct Answer
verified

Knox Corp. has a selling price of $20, variable costs of $14 per unit, and fixed costs of $25,000. If Knox sells 12,000 units, the contribution margin ratio will equal:

Correct Answer
verified

Correct Answer
verified
a. $38,000
b. $5.75
...
View Answer

Exam 5: Cost Behavior and Estimation

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is the correct equation for total mixed costs under the linearity assumption?

Correct AnswerverifiedShow Answer

Meadow uses the high-low method. It had total costs of $500,000 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 $780,000. Meadow would estimate fixed costs as:

Correct AnswerverifiedShow Answer

A scattergraph is useful in recognizing unusual patterns in the cost data

Correct AnswerverifiedShow Answer

Knox Corp. has a selling price of $20, variable costs of $14 per unit, and fixed costs of $25,000. If Knox sells 12,000 units, the contribution margin ratio will equal:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. $38,000b. $5.75...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. $38,000
b. $5.75
...
View Answer