Exam 6: Cost Behaviour: Analysis and Use

Why is it important to separate mixed costs into fixed and variable portions

Which of the following best describes the behaviour of variable cost per unit

Reference: 06-09 Prater Company has provided the following data: This Year Last Year Units sold 300,000 250,000 Sales revenue \ 1,300,000 \ 1,050,000 Less cost of goods sold 910,000 735,000 Gross margin 390,000 315,000 Less operating expenses 272,000 260,000 Net income \ 118,000 \ 55,000 -The best estimate of the company's total fixed operating expense per year is

Average maintenance costs are $1.50 per machine-hour at an activity level of 8,000 machine-hours and $1.20 per machine-hour at an activity level of 13,000 machine-hours. Assuming that this activity is within the relevant range, total expected maintenance cost for a budgeted activity level of 10,000 machine-hours would be closest to?

A cost formula may not be valid outside the relevant range of activity.

Reference: 06-10 The following data have been provided by a retail company that sells a single product. This Year Last Year Units sold 200,000 150,000 Sales revenue \ 1,000,000 \ 750,000 Less cost of goods sold 700,000 525,000 Gross margin 300,000 225,000 Less operating expenses 222,000 210,000 Net income \ 78,000 \ 15,000 -What is the best estimate of the company's variable operating expenses per unit

Reference: 06-12 An income statement for Crandall's Bookstore for the first quarter of the current year is presented below: Crandall's Bookstore Income Statement For the First Quarter of the Current Year Sales \ 800,000 Less cost of goods sold 560,000 Gross margin 240,000 Less operating expenses: Selling \ 98,000 Administrative 98,000 Net income \ 44,000 On average, a book sells for $50. Variable selling expenses are $5.50 per book, with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales, with the remainder being fixed. -The net income using the contribution approach for the first quarter is?

Reference: 06-06 Johnson Company has provided the following data for the first five months of the year: Machine Hours Lubrication Cost January 120 \ 750 February 160 \ 810 March 200 \ 870 April 150 \ 795 May 170 \ 825 -Using the high-low method of analysis, the estimated variable lubrication cost pe? machine hour is closest to?

Reference: 06-03 Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The following data describe the company's revenue and cost structure: Selling price per unit \ 40 Sales commission 5\% Purchase price (cost) per unit \ 18 Advertising expense \ 4,000 per month Administrative expense \ 4,500 per month plus 15\% of sales Assume that all activity mentioned in this problem is within the relevant range. -The expected contribution margin next month is?

Shipping expense is $9,000 for 8,000 pounds shipped and $11,250 for 11,000 pounds shipped. Assuming that this activity is within the relevant range, if the company ships 9,000 pounds, its expected shipping expense is closest to?

Which of the following is not a variable cost of producing sweatshirts

An example of a discretionary fixed cost is:

The concept of the relevant range does not apply to fixed costs.

Cost B is best described as?

Discretionary fixed costs:

An example of a committed fixed cost is:

The difference between sales revenues and the total of variable costs is:

Modern technology is causing shifts away from variable costs toward more fixed costs in many industries.

Which of the following statements is most correct about step-variable costs

Contribution margin is the difference between total variable expenses and total fixed expenses.