Exam 6: Cost Behaviour: Analysis and Use

Suppose Y Company uses ABC for internal decision-making and employs least-squares regression to analyze mixed costs. Required: Realistically,would you expect the company to use simple regression or multiple regression analysis? Explain.

A cost that is obtainable in large chunks and that increases or decreases only in response to fairly wide changes in the activity level is known as a step-variable cost.

Because the least-squares regression method is more accurate,a scattergram plot is unnecessary.

Maxwell Company has a total expense per unit of $2.00 per unit at the 16,000-unit level of activity, and total expense per unit of $1.95 at the 21,000-unit level of activity. -What is the best estimate of the total fixed cost per period for Maxwell Company?

The Great Toy Company (GTC) produces a radio-controlled toy that it wholesales to retailers. For the month of September 2008, GTC reported a before-tax profit of $4,400 when it produced and sold 7,500 units of the toy. GTC's controller has provided the following information about the company's cost structure: Note 1: These are additional total variable costs to produce (sell) the additional 4,000 units. Note 2: Each is calculated as additional fixed cost divided by the 4,000 additional units. The marketing manager states that the average selling price per unit for the 7,500 units that were sold in September 2008 is valid for the first 8,000 units. She, however, estimates that the average unit selling price for the additional 4,000 units will be 7.5% lower. Required: a. Calculate the following for the two levels of production and sales: (i) Average variable manufacturing cost per unit (ii) Average selling and administrative cost per unit (iii) Total fixed manufacturing cost (iv) Total fixed selling and administrative cost b. Using the contribution margin format, prepare the following: (i). An income statement for month ended September 30, 2008 when GTC produced and sold 7,500 units. (ii). Prepare a contribution for the month when GTC expects to produce and sell 12,000 units.

The high-low method is generally less accurate than the least-squares regression method for analyzing the behaviour of mixed costs.

Sorter Company has provided the following data for the third quarter of the most recent year: Assume that direct labour is a variable cost and that there was no beginning or ending inventories -Which of the following items of Sorter Company's expenses and/or costs can be misleading if reported on a per unit of production and/or sales basis?

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

Mateo Company's average cost per unit is $1.425 at the 16,000-unit level of activity and $1.38 at the 20,000-unit level of activity. Assume that all of the activity levels mentioned in this problem are within the relevant range. Required: Predict the following items for Mateo Company: (a)Variable cost per unit. (b)Total fixed cost per period. (c)Total expected costs at the 18,000-unit level of activity.

Which of the following is an example of a discretionary fixed cost?

Anaconda Mining Company shipped 9,000 tons of copper concentrate for $450,000 in March and 11,000 tons for $549,000 in April.Use the high-low method to estimate the shipping costs for 12,000 tons to be shipped in May.

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 which of the following?

Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below: All of the company's costs are either fixed, variable, or a mixture of the two (that is, mixed). Assume that the relevant range includes all of the activity levels mentioned in this problem. -Which of the operating expenses of the company is variable?

The following information has been provided by the Evans Retail Stores, Inc., for the first quarter of the year: -What is the contribution margin of Evans Retail Stores,Inc.,for the first quarter?

Porter Company has provided the following data for the second quarter of the most recent year: Assume that direct labour is a variable cost and that there was no beginning or ending inventories. -What was the gross margin for Porter Company for the second quarter?

Bell Company has provided the following data for maintenance costs: Using the high-low method,what is the cost formula for maintenance cost?

Contribution margin is the excess of revenues over which of the following?

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: Assume that all activity mentioned in this problem is within the relevant range. -What is the expected gross margin next month?

What will result from an increase in the activity level within the relevant range?

Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below: All of the company's costs are either fixed, variable, or a mixture of the two (that is, mixed). Assume that the relevant range includes all of the activity levels mentioned in this problem. -If sales are projected to be 8,000 units in September,what would be total operating expenses?