Exam 4: Techniques for Estimating Fixed and Variable Costs

In the short run:

Which of the following is not a technique used to construct contribution margin statements?

Regression analysis:

The high-low method requires:

If fixed costs are $15,000, profit before income taxes is $55,000, revenues are $160,000, variable costs are $90,000, contribution margin is:

Segmented contribution margin statements:

Fixed costs are relevant for decisions involving increasing or decreasing production volumes.

A disadvantage of using the regression analysis method is that it provides only one statistic to evaluate the data.

Because account classification requires us to examine each account in detail, it often provides inaccurate estimates.

Which of the following statements is not true concerning the segmented contribution margin statement?

Using the high-low method, managers use the two observations pertaining to the highest and lowest activity levels because these values are most likely to define any abnormal costs.

The contribution margin is well suited to evaluate short-term decision options.

A useful step for estimating controllable costs is:

An advantage of using the high-low method is that we can apply it if we know only total revenues, total costs, and activity volume.

The high-low method:

For any volume of activity, total costs are:

Using the account classification method, estimating the change in variable costs involve three steps. Which of the following is correct?

Segment (product) margin is calculated by:

Contribution margin equals revenues less variable costs.

A major drawback of using regression analysis is that the technique makes a number of assumptions about the data, and accounting data sometimes do not satisfy these assumptions.