Exam 2: Cost Behavior and Cost Estimation

Assume a selling price of $20 per unit, variable cost per unit of $12, and total fixed cost of $500.If 200 units are sold, calculate the contribution margin and the operating income.

Restate the following income statement for a merchandising company in contribution format.

Assume a scattergraph shows $100 at no activity and $1,500 at an activity level of 1,000 units.The variable cost per unit is

The contribution margin ratio can be used to

An example of a committed fixed cost is when a company signs a 10-year lease on an office building.

Which of the following is not a method of estimating costs?

GAAP-based income statements categorize expenses based on

Pam's Puppy Parlor is a pet grooming parlor and boutique.Pam sells personalized puppy blankets at $20 each.Her contribution margin is $5.If Pam has an additional $80 in blanket sales, how much additional contribution margin will this produce?

Which of the following is not an example of a variable cost for a manufacturer of bicycles?

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.The cost is an example of a

Georgiana operates a nail salon.She is trying to plan her costs for the next month and is uncertain as to how to estimate those costs.Help her estimate next month's costs given the following information she collected, based on number of customers per month. If Georgiana believes next month is going to be busier than the last few months and she expects 1,850 customers (relevant range is 1,000 to 2,000 customers per month), what is the expected cost for electricity?

Which of the following is an example of a variable cost for a bicycle manufacturer?

Which of the following is a method of estimating costs?

Jenny's Cutting Station offers a new concept in haircuts; low cost and very quick.Set in a local mall, Jenny's offers 15-minute haircuts for harried shoppers who do not have time for lengthy appointments.To ensure that the clients are in and out quickly, she schedules her 5 employees based on expected client traffic.Each of the employees is paid $1,200 per month, with part of their pay coming from client tips.Jenny pays rent and overhead costs of $2,000 per month.Because of the quick nature of the service, Jenny doesn't have time to clean combs in between clients, so she uses a new comb for each customer, at a cost of $0.55 each.She also provides shampoo and conditioner for each client at a cost of $0.95 per client.The average price for a haircut is $12.Jenny pays herself $5,000 per month.Calculate Jenny's net operating income assuming 1,400 haircuts this month.

When a manager talks about cost behavior, she is referring to

Since a mixed cost has both a fixed and a variable component, both the total cost and the unit cost will vary with changes in the level of activity.

A contribution margin format income statement presents all costs by

If the activity level increases, what happens to the unit fixed cost?

Mounce's Market operates with a 20% contribution margin.If Mounce's sales decrease by $10,000, operating income will decrease by

Which of the following is a characteristic of a fixed cost?