Exam 6: Activity Analysis,cost Behavior,and Cost Estimation

The following data relate to the Lisle Company for May and August of the current year: May and August were the lowest and highest activity levels,and Lisle uses the high-low method to analyze cost behavior.If maintenance hours are estimated to be 26,000 hours in October,which of the following statements is true?

When graphed,a typical variable cost appears as:

What type of cost exhibits the behavior that follows?

Which of the following choices correctly classifies a committed fixed cost and a discretionary fixed cost?

The cost formula that expresses the behavior of Yang's total cost is:

Straight-line depreciation is a typical example of a:

Compare and contrast the following types of costs: (1)variable and step-variable and (2)fixed and step-fixed.

A mixed cost is often known as a:

A cost that has both a fixed and variable component is best termed a:

Temperance,Inc.is studying marketing cost and sales volume,and has generated the following information by use of a scatter diagram and a least-squares regression analysis: Temperance is now preparing an estimate for monthly sales of 18,000 units.On the basis of the data presented,compute the most accurate sales forecast possible.

The relevant range is that range of activity where a company achieves its maximum efficiency.

Each of Davisson's production managers (annual salary cost,$45,000)can oversee 60,000 machine hours of manufacturing activity.Thus,if the company has 50,000 hours of manufacturing activity,one manager is needed;for 75,000 hours,two managers are needed;for 125,000 hours,three managers are needed;and so forth.Davisson's salary cost can best be described as a:

Both the visual-fit and high-low methods of cost estimation have inherent limitations.Briefly identify the major deficiency associated with each method.

Which of the following tools is not associated with cost estimation?

Mismatched time periods is not an issue in the collection of data for cost estimation.

The following data relate to the Lisle Company for May and August of the current year: May and August were the lowest and highest activity levels,and Lisle uses the high-low method to analyze cost behavior.If maintenance hours are estimated to be 26,000 hours in October,which of the following statements is true?

Variable costs change in direct proportion to a change in the activity level.

Southbend Medical Clinic offers a number of specialized medical services.A review of data for the year just ended revealed variable costs of $32 per patient day;annual fixed costs of $480,000,which are incurred evenly throughout the year;and semivariable costs that displayed the following behavior at the "peak" and "valley" of activity: January (2,400 patient days): $258,400 August (2,900 patient days): $278,900 Required: A.Analysis of semivariable cost (variable portion): ($278,900 - $258,400)/ (2,900 - 2,400)= $41 per patient day A.Calculate the total cost for an upcoming month (2,800 patient days)if current cost behavior patterns continue.Southbend uses the high-low method to analyze cost behavior. B.No.The "peak" and "valley" of operation were 2,900 patient days and 2,400 patient days,respectively.The 3,800-patient-day data point is well outside this range of observed cost relationships and recent activity (i.e. ,the relevant range).Costs can change outside of this range (e.g. ,fixed costs may be higher),and the lack of past experience will likely create unknowns for the analyst. B.There is a high probability that Southbend's volume will increase in forthcoming months as patients take advantage of new scientific advances.Can the data and methodology used in part (a)for predicting the costs of 2,800 patient days be employed to estimate the costs for,say,3,800 patient days? Why or why not?

Normal Company pays a sales commission of 4% on each unit sold.If a graph is prepared,with the vertical axis representing per-unit cost and the horizontal axis representing units sold,how would a line that depicts sales commissions be drawn?

Property taxes are an example of a(n):