Exam 5: Cost Behavior and Estimation

Cardinal uses the high-low method of estimating costs. Cardinal 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 10,000 units, total costs were $39,000. Cardinal would estimate variable cost per unit as:

R-square tells managers how much of the variability in activity is caused by variability in cost

Which of the following is true about the visual fit method?

The least-squares regression method uses all of the available data to find the best fitting line

Fremont, which uses the high-low method, reported total costs of $10 per unit at its lowest production level, 5,000 units. When production tripled to its highest level, the total cost per unit dropped to $5. Fremont would estimate its variable cost per unit as:

Jasper Enterprises had the following cost and production information for April: What is Jasper Enterprise's income under variable costing?

If the number of units sold is the same every month, the profit from these units will be the same every month if:

Flint Enterprises had the following cost and production information for April: Inventory increased by 3,000 units during April. What is Flint Enterprise's income under variable costing?

Sugar Corp. has a selling price of $20, variable costs of $12 per unit, and fixed costs of $25,000. Maple expects profit of $300,000 at its anticipated level of production. If Sugar sells 5,000 units more than expected, how much higher will its profits be?

Which of the following statements is correct about the high-low method?

Using the results of the least-squares regression analysis, which value estimates total fixed costs?

All else being equal, if sales revenue doubles, variable costs will:

We generally need ___________ data points to get reliable regression results using the least-squares regression method.

Citrus, Inc. used the high-low method to estimate that its fixed costs are $210,000. At its low level of activity, 100,000 units, average cost was $2.60 per unit. What would Citrus predict its average cost per unit to be when production is 200,000 units?

All else being equal, if sales revenue doubles, fixed costs will:

The contribution margin ratio is:

The contribution margin income statement is appropriate for external users

Fremont, which uses the high-low method, reported total costs of $10 per unit at its lowest production level, 5,000 units. When production tripled to its highest level, the total cost per unit dropped to $5. Fremont would estimate its total fixed cost as:

The high-low method is a cost estimating approach that uses _______________ to find the cost line.

Flint Enterprises had the following cost and production information for April: Inventory increased by 3,000 units during April. How much greater will Flint Enterprises' income be under absorption costing than under variable costing?