Question 1

A limitation of the high-low method is that

Accepted Answer

A) it is costly to use because it uses a statistical technique to estimate the cost components. 
B) it is complex to calculate. 
C) it can only be used if the levels of activity cover a wide range. 
D) because it is based on only two extreme points, the high and low activity levels, the cost equation may not be truly representative of the cost relationship. 
A) it is costly to use because it uses a statistical technique to estimate the cost components. 
B) it is complex to calculate. 
C) it can only be used if the levels of activity cover a wide range. 
D) because it is based on only two extreme points, the high and low activity levels, the cost equation may not be truly representative of the cost relationship.

Question 2

Assume sales revenue of $50,000, variable costs of $22,000, and fixed costs of $25,000.Prepare a contribution format income statement.

Accepted Answer

The answer of Assume sales revenue of $50,000, variable costs...

Question 3

International Imports is a merchandising firm.Last year, the company reported sales of $674,500 and cost of goods sold of $404,700.The company's total variable selling and administrative expense was $60,705, and fixed selling and administrative expense was $53,960.The total variable costs for the firm are

Accepted Answer

A) $60,705. 
B) $114,665. 
C) $404,700. 
D) $465,405. 
A) $60,705. 
B) $114,665. 
C) $404,700. 
D) $465,405.

Question 4

An example of a discretionary fixed cost for a clothing manufacturer is

Accepted Answer

A) an annual contract for television advertising cost. 
B) a 10-year lease on an office building. 
C) yards of fabrics used. 
D) thread used. 
A) an annual contract for television advertising cost. 
B) a 10-year lease on an office building. 
C) yards of fabrics used. 
D) thread used.

Question 5

Contribution margin = Sales revenue - Total variable costs.

Accepted Answer

A) True 
 B)False

Question 6

Once you know how a particular cost behaves, estimating the total cost is relatively simple.

Accepted Answer

A) True 
 B)False

Question 7

Jenny's Cutting Station is 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.What is Jenny's contribution margin ratio?

Accepted Answer

A) 12.5% 
B) 83.5% 
C) 87.5% 
D) 8.3% 
A) 12.5% 
B) 83.5% 
C) 87.5% 
D) 8.3%

Question 8

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

Accepted Answer

The answer of Restate the following income statement for a...

Question 9

Mounce Corporation leases a color copier for a monthly fee of $75 plus a charge of $0.02 per copy.Mounce's copy cost is classified as a

Accepted Answer

A) variable cost. 
B) fixed cost. 
C) step variable cost. 
D) mixed cost. 
A) variable cost. 
B) fixed cost. 
C) step variable cost. 
D) mixed cost.

Question 10

Complete each of the following contribution format income statements by supplying the missing numbers.

Accepted Answer

The answer of Complete each of the following contribution format...

Question 11

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

Accepted Answer

A) True 
 B)False

Question 12

Assume you are planning a spring break ski trip to Colorado.You plan to stay at a lodge that has a special where the lodge charges you a flat fee of $25 for each package of ten ski lift rides..You believe you will ride the ski lift 40 times during the week, so you budget $100.The ski lift charge is an example of a

Accepted Answer

A) fixed cost. 
B) variable cost. 
C) mixed cost. 
D) step cost. 
A) fixed cost. 
B) variable cost. 
C) mixed cost. 
D) step cost.

Question 13

If the activity level decreases, what happens to the total fixed cost?

Accepted Answer

A) It remains the same. 
B) It decreases. 
C) It increases. 
D) It depends on how much the activity level increases. 
A) It remains the same. 
B) It decreases. 
C) It increases. 
D) It depends on how much the activity level increases.

Question 14

Upton, Inc.has collected the following information on its copying costs for the month.   Required: 
a.Using the high-low-method, compute the variable cost per copy.
b.Compute the total fixed cost per month.
c.Represent the copy cost function in equation form.
d.What is the expected cost if 800 copies are made?

Accepted Answer

a.($290 ̶ $100) ̶ (700 - 200)

Question 15

FastPrint Company leases a machine that stuffs, seals, and stamps envelopes in one process.FastPrint's lease agreement calls for a base charge of $4,000 per year plus $0.25 for every envelope over 1,000 the machine processes per month.
Required:
a.What is the firm's total annual cost for the lease if a total of 2,500 envelopes are processed each month?
b.What is the firm's total processing cost per envelope at a level of 2,500 envelopes processed each month?
c.What is the firm's processing cost per envelope if only 1,500 envelopes are processed each month?

Accepted Answer

a.(($2,500 ̶ $1,000) × 12) = $

Question 16

A limitation of using the scattergraph method to estimate the cost components of total cost is the

Accepted Answer

A) scattergraph method is complex and costly to use. 
B) scattergraph method requires the use of statistical software. 
C) scattergraph method is not an accepted method for many companies. 
D) choice of the line used to estimate the cost components is subjective. 
A) scattergraph method is complex and costly to use. 
B) scattergraph method requires the use of statistical software. 
C) scattergraph method is not an accepted method for many companies. 
D) choice of the line used to estimate the cost components is subjective.

Question 17

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 $100 in blanket sales, how much will her profit increase?

Accepted Answer

A) $5 
B) $25 
C) $50 
D) $100 
A) $5 
B) $25 
C) $50 
D) $100

Question 18

A basic tool for making business decisions is the contribution margin.

Accepted Answer

A) True 
 B)False

Question 19

On a scattergraph, once the individual points have been plotted,

Accepted Answer

A) enter the information into a statistical calculator to calculate the total cost. 
B) count the points and divide by variable cost per unit. 
C) draw a line through the points to estimate the cost relationship. 
D) multiply the high point by the variable cost per unit to calculate the total cost. 
A) enter the information into a statistical calculator to calculate the total cost. 
B) count the points and divide by variable cost per unit. 
C) draw a line through the points to estimate the cost relationship. 
D) multiply the high point by the variable cost per unit to calculate the total cost.

Question 20

If the activity level decreases, what happens to the total variable cost?

Accepted Answer

A) It decreases. 
B) It increases. 
C) It remains the same. 
D) It depends on how much the activity level increases. 
A) It decreases. 
B) It increases. 
C) It remains the same. 
D) It depends on how much the activity level increases.

A limitation of the high-low method is that

Assume sales revenue of $50,000, variable costs of $22,000, and fixed costs of $25,000.Prepare a contribution format income statement.

An example of a discretionary fixed cost for a clothing manufacturer is

Contribution margin = Sales revenue - Total variable costs.

Once you know how a particular cost behaves, estimating the total cost is relatively simple.

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

Mounce Corporation leases a color copier for a monthly fee of $75 plus a charge of $0.02 per copy.Mounce's copy cost is classified as a

Complete each of the following contribution format income statements by supplying the missing numbers.

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

If the activity level decreases, what happens to the total fixed cost?

A limitation of using the scattergraph method to estimate the cost components of total cost is the

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 $100 in blanket sales, how much will her profit increase?

A basic tool for making business decisions is the contribution margin.

On a scattergraph, once the individual points have been plotted,

If the activity level decreases, what happens to the total variable cost?

Accounting As a Tool for Management

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

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Exam 2: Cost Behavior and Cost Estimation

A limitation of the high-low method is that

Assume sales revenue of $50,000, variable costs of $22,000, and fixed costs of $25,000.Prepare a contribution format income statement.

An example of a discretionary fixed cost for a clothing manufacturer is

Contribution margin = Sales revenue - Total variable costs.

Once you know how a particular cost behaves, estimating the total cost is relatively simple.

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

Mounce Corporation leases a color copier for a monthly fee of $75 plus a charge of $0.02 per copy.Mounce's copy cost is classified as a

Complete each of the following contribution format income statements by supplying the missing numbers.

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

If the activity level decreases, what happens to the total fixed cost?

A limitation of using the scattergraph method to estimate the cost components of total cost is the

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 $100 in blanket sales, how much will her profit increase?

A basic tool for making business decisions is the contribution margin.

On a scattergraph, once the individual points have been plotted,

If the activity level decreases, what happens to the total variable cost?

Accounting As a Tool for Management

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Filters