Exam 6: Cost Behaviour: Analysis and Use

Given the cost formula Y = $17,500 + $4X, at what level of activity will total cost be $42,500?

Reference: 06-04 In the O'Donnell Manufacturing Company, at an activity level of 80,000 machine hours, total overhead costs were $223,000. Of this amount, utilities were $48,000 (all variable) and depreciation was $60,000 (all fixed). The balance of the overhead cost consisted of maintenance cost (mixed). At 100,000 machine hours, maintenance costs were $130,000. Assume that all of the activity levels mentioned in this problem are within the relevant range. -If 110,000 machine hours of activity are projected for next period, total expected overhead cost would be?

Given the cost formula Y = $12,000 + $6X, total cost at an activity level of 8,000 units would be?

An advantage of the least-squares regression method is that it provides statistical evidence as to the reliability of the cost estimates generated.

Actual maintenance costs for a movie theatre for the months of July and August are as follows: July August Maintenance hours worked 1,660 Hourly wages and benefits \ 18,600 \ 19,920 Cleaning supplies 3,100 3,320 Equipment lease costs 2,000 Total maintenance costs The manager is checking to see that enough maintenance hours are scheduled for the month of September. The total budget for maintenance costs for September is $26,990 and experience has shown that maintenance cost behaviour is quite consistent from month to month. How many hours should be scheduled for September maintenance?

The planning horizons for committed fixed costs and discretionary fixed costs are generally the same.

Reference 06-14 Macklemore Corporation has identified the following costs at different activity levels: Activity (units sold) Cost A Cost B Cost C 10 \ 40 \ 100 \ 30 20 \ 80 \ 100 \ 40 30 \ 120 \ 100 \ 50 40 \ 160 \ 100 \ 60 50 \ 200 \ 100 \ 70 -Cost A is best described as?

The contribution margin approach to the income statement classifies costs by behaviour rather than by function.

A cost that increases or decreases only in response to more than a unit change in the activity level is known as a step-variable cost.

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 total fixed operating expenses per year

Reference: 06-07 Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the last five months of operations. Machine Hours Electrical Cost August 1,000 \ 1,550 September 900 1,510 October 1,500 1,750 November 2,000 1,950 December 1,300 1,670 -Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is closest to?

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 variable operating expense per unit is

If the contribution margin is $50,000 and the total of fixed expenses is $40,000, then net income is $10,000.

Given the cost formula Y = $15,000 + $5X, total cost at an activity level of 8,000 units would be?

In order for a cost to be variable it must vary with either units produced or units sold.

An analysis of past maintenance costs indicates that maintenance cost is an average of $0.20 per machine-hour at an activity level of 10,000 machine-hours and $0.25 per machine-hour at an activity level of 8,000 machine-hours. Assuming that this activity is within the relevant range, what is the total expected maintenance cost if the activity level is 8,700 machine-hours?

Anaconda Mining Company shipped 9,000 tons of copper concentrate for $450,000 in March and 11,000 tons for $549,000 in April. Shipping costs for 12,000 tons to be shipped in May would be expected to be?

Reddy Company has the following cost formulas for overhead: Cost Cost Formula Indirect materials \ 2,000 plus \ 0.40 per machine hour Maintenance \ 1,500 plus \ 0.60 per machine hour Machine setup \ 0.30 per machine hour Utilities \ 200 plus \ 0.10 per machine hour Depreciation \ 800 Based on these cost formulas, the total overhead cost at 600 machine hours is expected to be?

Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant range. In terms of cost per unit of activity, we would expect that:

Reference: 06-02 Comparative income statements for Boggs Sports Equipment Company for the last two months are presented below: July August Sales in Units 11,000 10,000 Sales Revenue \ 165,000 \ 150,000 Less Cost of Goods Sold 72,600 66,000 Gross Margin 92,400 84,000 Less Operating Expenses: Rent 12,000 12,000 Sales Commissions 13,200 12,000 Maintenance Expenses 13,500 13,000 Clerical Expense 16,000 15,000 Total Operating Expenses 54,700 52,000 Net income \ 37,700 \ 32,000 All of the company's costs are either fixed, variable, or a mixture of the two (i.e., mixed). The company is a merchandising company. Assume that the relevant range includes all of the activity levels mentioned in this problem. -The total monthly fixed cost for Boggs Sports Equipment Company is?