Exam 5: Cost Behavior and Estimation

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?

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?

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

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

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:

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?

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: