Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below: $\begin{array}{|l|r|r|} \hline & \text { July } & \text { August } \\ \hline \text { Sales in Units } & 11,000 & 10,000 \\ \hline \text { Sales Revenue } & \$ 165,000 & \$ 150,000 \\ \hline \text { Less: Cost of Goods Sold } & \underline{72,600} & \underline{66,000} \\ \hline \text { Gross Margin } & 92,400 & 84,000 \\ \hline \text { Less: Operating Expenses: } & & \\\hline \text { Rent } & 12,000 & 12,000 \\ \hline \text { Sales Commissions } & 13,200 & 12,000 \\ \hline \text { Maintenance Expenses } & 13,500 & 13,000 \\ \hline \text { Clerical Expenses } & \underline{16,000} & \underline{15,000} \\ \hline \text { Total Operating Expenses } & \underline{\$ 54,700} & \underline{\$ 52,000} \\ \hline \text { Operating Income } & \underline{\$ 37,700} & \underline{\$ 32,000} \\ \hline \end{array}$ 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?

A) Rent. B) Sales commissions. C) Maintenance expenses. D) Clerical expenses. A) Rent. B) Sales commissions. C) Maintenance expenses. D) Clerical expenses.

Porter Company has provided the following data for the second quarter of the most recent year: $\begin{array}{|l|r|} \hline \text { Sales } & \$ 300,000 \\ \hline \text { Fixed Manufacturing Overhead } & 55,000 \\ \hline \text { Direct Labour } & 72,500 \\ \hline \text { Fixed Selling Expenses } & 46,250 \\ \hline \text { Variable Manufacturing Overhead } & 41,000 \\ \hline \text { Variable Administrative Expenses } & 48,000 \\ \hline \text { Direct Materials } & 51,500 \\ \hline \text { Fixed Administrative Expenses } & 44,500 \\ \hline \text { Variable Selling Expenses } & 49,750 \\ \hline \end{array}$Assume that direct labour is a variable cost and that there was no beginning or ending inventories. -What was the total contribution margin of Porter Company for the second quarter?

A) $37,250. B) $87,000. C) $176,000. D) $211,000. A) $37,250. B) $87,000. C) $176,000. D) $211,000.

Sorter Company has provided the following data for the third quarter of the most recent year: $\begin{array}{|l|r|} \hline \text { Sales } & \$ 500,000 \\ \hline \text { Fixed Manufacturing Overhead } & 55,000 \\ \hline \text { Direct Labour } & 72,500 \\ \hline \text { Fixed Selling Expenses } & 46,250 \\ \hline \text { Variable Manufacturing Overhead } & 41,000 \\ \hline \text { Variable Administrative Expenses } & 48,000 \\ \hline \text { Direct Materials } & 51,500 \\ \hline \text { Fixed Administrative Expenses } & 44,500 \\ \hline \text { Variable Selling Expenses } & 49,750\\\hline \end{array}$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?

A) Direct labour B) Direct materials. C) Variable administrative expenses. D) Fixed manufacturing overhead. A) Direct labour B) Direct materials. C) Variable administrative expenses. D) Fixed manufacturing overhead.

Below are cost and activity data for a particular cost over the last four periods.Your boss has asked you to analyze this cost so that management will have a better understanding of how this cost changes in response to changes in activity. $\begin{array}{|l|r|r|} \hline & \text { Activity } & \text { Cost } \\ \hline \text { Period 1 } & 44 & 277 \\ \hline \text { Period 2 } & 42 & 265 \\ \hline \text { Period 3 } & 48 & 284 \\ \hline \text { Period 4 } & 49 & 284 \\ \hline \end{array}$ Required: Using the least-squares regression method and the equations for a and b,estimate the cost formula for this cost.

n = 4 @#LAT-DLM&X = 183 @#LAT-DLM&Y = 1,110 @#LAT-DLM&XY = 50,866

Rymore Company would like to classify the following costs according to their cost behaviour: $\begin{array}{|l|r|r|} \hline & \text { July } & \text { August } \\ \hline \text { Sales in Units } & 1,500 & 1,600 \\ \hline \text { Cost A } & \$ 35,000 & \$ 36,000 \\ \hline \text { Cost B } & 16,000 & 16,000 \\ \hline \text { Cost C } & 67,500 & 72,000 \\ \hline \end{array}$ -Which of the following classifications best describes the behaviour of Cost C?

A) Mixed. B) Variable. C) Fixed. D) Differential cost. A) Mixed. B) Variable. C) Fixed. D) Differential cost.

Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below: $\begin{array}{|l|r|r|} \hline & \text { July } & \text { August } \\ \hline \text { Sales in Units } & 11,000 & 10,000 \\ \hline \text { Sales Revenue } & \$ 165,000 & \$ 150,000 \\ \hline \text { Less: Cost of Goods Sold } & \underline{72,600} & \underline{66,000} \\ \hline \text { Gross Margin } & 92,400 & 84,000 \\ \hline \text { Less: Operating Expenses: } & & \\\hline \text { Rent } & 12,000 & 12,000 \\ \hline \text { Sales Commissions } & 13,200 & 12,000 \\ \hline \text { Maintenance Expenses } & 13,500 & 13,000 \\ \hline \text { Clerical Expenses } & \underline{16,000} & \underline{15,000} \\ \hline \text { Total Operating Expenses } & \underline{\$ 54,700} & \underline{\$ 52,000} \\ \hline \text { Operating Income } & \underline{\$ 37,700} & \underline{\$ 32,000} \\ \hline \end{array}$ 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?

A) $41,600. B) $44,750. C) $46,600. D) $49,300. A) $41,600. B) $44,750. C) $46,600. D) $49,300.

Prater Company has provided the following data: $\begin{array}{|l|r|r|} \hline & \text { This Year } & \text { Last Year } \\ \hline \text { Units Sold } & 300,000 & 250,000 \\ \hline \text { Sales Revenue } & \$ 1,300,000 & \$ 1,050,000 \\ \hline \text { Less: Cost of Goods Sold } & \underline{910,000} & \underline{\mathbf{7 3 5 , 0 0 0}} \\ \hline \text { Gross Margin } & 390,000 & 315,000 \\ \hline \text { Less: Operating Expenses } & \underline{\mathbf{2 7 2 , 0 0 0}} & \underline{\mathbf{2 6 0 , 0 0 0}} \\ \hline \text { Operating Income } & \underline{\$ 118,000} & \underline{\$ 55,000} \\ \hline \end{array}$ -What is the best estimate of the company's variable operating expense per unit?

A) $0.24 per unit. B) $0.91 per unit. C) $0.96 per unit. D) $4.17 per unit. A) $0.24 per unit. B) $0.91 per unit. C) $0.96 per unit. D) $4.17 per unit.

Sorter Company has provided the following data for the third quarter of the most recent year: $\begin{array}{|l|r|} \hline \text { Sales } & \$ 500,000 \\ \hline \text { Fixed Manufacturing Overhead } & 55,000 \\ \hline \text { Direct Labour } & 72,500 \\ \hline \text { Fixed Selling Expenses } & 46,250 \\ \hline \text { Variable Manufacturing Overhead } & 41,000 \\ \hline \text { Variable Administrative Expenses } & 48,000 \\ \hline \text { Direct Materials } & 51,500 \\ \hline \text { Fixed Administrative Expenses } & 44,500 \\ \hline \text { Variable Selling Expenses } & 49,750\\\hline \end{array}$Assume that direct labour is a variable cost and that there was no beginning or ending inventories. -At the level of sales for the third quarter,how much in additional fixed selling expenses could Sorter Company have afforded to spend and still would have reported $41,500 operating income?

A) $50,000. B) $87,750. C) $91,500. D) $96,250. A) $50,000. B) $87,750. C) $91,500. D) $96,250.

Exam 3: Cost Behaviour: Analysis and Use

Comparative income statements for Boggs Sporting 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 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 Expenses Total Operating Expenses Operating Income 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?

(Multiple Choice)

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Question 21

Which of the following should be the first step in the analysis of cost behaviour?

(Multiple Choice)

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Question 22

Which of the following is an example of a cost that is variable with respect to the number of units produced and sold?

(Multiple Choice)

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Question 23

The R² tells us the percentage of the variation in the dependent variable (e.g.,cost)that is explained by variation in the independent variable (activity).

(True/False)

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Question 24

In describing the cost formula equation Y = a + bX,which of the following statements is correct?

(Multiple Choice)

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Question 25

Porter Company has provided the following data for the second quarter of the most recent year: Sales \ 300,000 Fixed Manufacturing Overhead 55,000 Direct Labour 72,500 Fixed Selling Expenses 46,250 Variable Manufacturing Overhead 41,000 Variable Administrative Expenses 48,000 Direct Materials 51,500 Fixed Administrative Expenses 44,500 Variable Selling Expenses 49,750 Assume that direct labour is a variable cost and that there was no beginning or ending inventories. -What was the total contribution margin of Porter Company for the second quarter?

(Multiple Choice)

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Question 26

Sorter Company has provided the following data for the third quarter of the most recent year: Sales \ 500,000 Fixed Manufacturing Overhead 55,000 Direct Labour 72,500 Fixed Selling Expenses 46,250 Variable Manufacturing Overhead 41,000 Variable Administrative Expenses 48,000 Direct Materials 51,500 Fixed Administrative Expenses 44,500 Variable Selling Expenses 49,750 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?

(Multiple Choice)

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Question 27

Shipping expense is $9,000 for 8,000 kilograms shipped and $11,250 for 11,000 kilograms shipped.Assuming that this activity is within the relevant range,if the company ships 9,000 kilograms,its expected shipping expense would be closest to which of the following?

(Multiple Choice)

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Question 28

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?

(Multiple Choice)

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Question 29

What does the term "relevant range" mean?

(Multiple Choice)

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Question 30

At a sales level of $300,000,James Company's gross margin is $15,000 less than its contribution margin,its operating income is $50,000,and its total selling and administrative expenses are $120,000.At this sales level,what is the company's contribution margin?

(Multiple Choice)

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Question 31

Below are cost and activity data for a particular cost over the last four periods.Your boss has asked you to analyze this cost so that management will have a better understanding of how this cost changes in response to changes in activity. Activity Cost Period 1 44 277 Period 2 42 265 Period 3 48 284 Period 4 49 284 Required: Using the least-squares regression method and the equations for a and b,estimate the cost formula for this cost.

(Essay)

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Question 32

Rymore Company would like to classify the following costs according to their cost behaviour: July August Sales in Units 1,500 1,600 Cost A \ 35,000 \ 36,000 Cost B 16,000 16,000 Cost C 67,500 72,000 -Which of the following classifications best describes the behaviour of Cost C?

(Multiple Choice)

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Question 33

Comparative income statements for Boggs Sporting 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 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 Expenses Total Operating Expenses Operating Income 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?

(Multiple Choice)

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Question 34

What are committed fixed costs?

(Multiple Choice)

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Question 35

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 Gross Margin 390,000 315,000 Less: Operating Expenses Operating Income -What is the best estimate of the company's variable operating expense per unit?

(Multiple Choice)

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Question 36

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

(True/False)

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Question 37

The concept of the relevant range does not apply to fixed costs.

(True/False)

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Question 38

Modern technology is causing shifts away from variable costs toward more fixed costs in many industries.

(True/False)

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Question 39

Sorter Company has provided the following data for the third quarter of the most recent year: Sales \ 500,000 Fixed Manufacturing Overhead 55,000 Direct Labour 72,500 Fixed Selling Expenses 46,250 Variable Manufacturing Overhead 41,000 Variable Administrative Expenses 48,000 Direct Materials 51,500 Fixed Administrative Expenses 44,500 Variable Selling Expenses 49,750 Assume that direct labour is a variable cost and that there was no beginning or ending inventories. -At the level of sales for the third quarter,how much in additional fixed selling expenses could Sorter Company have afforded to spend and still would have reported $41,500 operating income?

(Multiple Choice)

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Question 40

Which of the following should be the first step in the analysis of cost behaviour?

Which of the following is an example of a cost that is variable with respect to the number of units produced and sold?

The R² tells us the percentage of the variation in the dependent variable (e.g.,cost)that is explained by variation in the independent variable (activity).

In describing the cost formula equation Y = a + bX,which of the following statements is correct?

Shipping expense is $9,000 for 8,000 kilograms shipped and $11,250 for 11,000 kilograms shipped.Assuming that this activity is within the relevant range,if the company ships 9,000 kilograms,its expected shipping expense would be closest to which of the following?

What does the term "relevant range" mean?

At a sales level of $300,000,James Company's gross margin is $15,000 less than its contribution margin,its operating income is $50,000,and its total selling and administrative expenses are $120,000.At this sales level,what is the company's contribution margin?

Rymore Company would like to classify the following costs according to their cost behaviour: July August Sales in Units 1,500 1,600 Cost A \ 35,000 \ 36,000 Cost B 16,000 16,000 Cost C 67,500 72,000 -Which of the following classifications best describes the behaviour of Cost C?

What are committed fixed costs?

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

The concept of the relevant range does not apply to fixed costs.

Modern technology is causing shifts away from variable costs toward more fixed costs in many industries.

Managerial Accounting and the Business Environment

Cost Terms,concepts,and Classifications

Cost-Volume-Profit Relationships

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: A Tool to Aid Decision Making

Variable Costing: A Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Financial Statement Analysis

Filters

Exam 3: Cost Behaviour: Analysis and Use

Which of the following should be the first step in the analysis of cost behaviour?

Which of the following is an example of a cost that is variable with respect to the number of units produced and sold?

The R2 tells us the percentage of the variation in the dependent variable (e.g.,cost)that is explained by variation in the independent variable (activity).

In describing the cost formula equation Y = a + bX,which of the following statements is correct?

Shipping expense is $9,000 for 8,000 kilograms shipped and $11,250 for 11,000 kilograms shipped.Assuming that this activity is within the relevant range,if the company ships 9,000 kilograms,its expected shipping expense would be closest to which of the following?

What does the term "relevant range" mean?

At a sales level of $300,000,James Company's gross margin is $15,000 less than its contribution margin,its operating income is $50,000,and its total selling and administrative expenses are $120,000.At this sales level,what is the company's contribution margin?

Rymore Company would like to classify the following costs according to their cost behaviour: July August Sales in Units 1,500 1,600 Cost A \ 35,000 \ 36,000 Cost B 16,000 16,000 Cost C 67,500 72,000 -Which of the following classifications best describes the behaviour of Cost C?

What are committed fixed costs?

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

The concept of the relevant range does not apply to fixed costs.

Modern technology is causing shifts away from variable costs toward more fixed costs in many industries.

Managerial Accounting and the Business Environment

Cost Terms,concepts,and Classifications

Cost-Volume-Profit Relationships

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: A Tool to Aid Decision Making

Variable Costing: A Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Financial Statement Analysis

Filters

The R² tells us the percentage of the variation in the dependent variable (e.g.,cost)that is explained by variation in the independent variable (activity).