Question 1

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. 
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. D

Question 2

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 3

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

Question 4

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)  $2.60 
A)  $0.50 
B)  $1.55 
C)  $2.10 
D)  $2.60

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

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)  $35,000 
A)  $30.00 
B)  $82.50 
C)  $17,500 
D)  $35,000

Question 8

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. 
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.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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. 
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.

Question 11

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)  $128,000 
A)  $28,000 
B)  $30,000 
C)  $64,000 
D)  $128,000

Question 12

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. 
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.

Question 13

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. 
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.

Question 14

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. 
A)  fixed cost per unit. 
B)  total fixed cost. 
C)  variable cost per unit. 
D)  sales price per unit.

Question 15

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 16

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. 
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.

Question 17

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 18

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. 
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.

Question 19

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)  $80,000 
A)  $32,000 
B)  $52,000 
C)  $62,000 
D)  $80,000

Question 20

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

A step cost:

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.

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:

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?

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

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

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:

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

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

Which of the following is a fixed cost?

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:

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

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

The slope of the cost line on a scattergraph represents:

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?

The relevant range is:

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?

Cost behavior is:

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?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 5: Cost Behavior and Estimation

A step cost:

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.

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:

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?

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

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

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:

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

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

Which of the following is a fixed cost?

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:

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

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

The slope of the cost line on a scattergraph represents:

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?

The relevant range is:

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?

Cost behavior is:

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?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

Filters