Exam 3: Cost Behaviour: Analysis and Use

The following information summarizes the company's cost structure Variable cost per unit \ 1.30 Fixed cost per unit Total cost per unit \ 5.80 Units produced and sold 48,000 Assume that all of the activity levels mentioned in this problem are within the relevant range. Required: Prepare a schedule showing predictions for the following items at the 40,000 unit level of activity: a)Total variable cost. b)Total fixed cost. c)Variable cost per unit. d)Fixed cost per unit.

Selected data about Pitkin Company's manufacturing operations at two levels of activity are presented below: Number of Units Produced 10,000 15,000 Total Manufacturing Costs \ 157,000 \ 225,000 Direct Material Cost per Unit \ 4 \ 4 Direct Labour Cost per Unit \ 6 \ 6

The "goodness of fit" statistic (that is,R-squared)associated with the least-squares regression method indicates the proportion of a mixed cost that is variable.

Which of the following is generally true for the cost of goods sold amount that a merchandising company would report on its income statement?

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

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.The selling price is $3.00 per unit 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. (d)Total Contribution Margin at the 18,000 unit level of production and sales.

Buckeye Company has provided the following data for maintenance cost: Prior Year Current Year Machine Hours 12,500 15,000 Maintenance Cost \ 27,000 \ 31,000 Using the high-low method,what is the cost formula for maintenance cost?

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 total fixed operating expense per year?

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.

The following data have been provided by a retailer that sells a single product: This Year Last Year Units Sold 200,000 150,000 Sales Revenue \ 1,000,000 \ 1750,000 Less: Cost of Goods Sold Gross Margin 300,000 225,000 Less: Operating Expenses Operating Income -What is the best estimate of the company's variable operating expenses per unit?

Expense A is a fixed cost; expense B is a variable cost.During the current year,the activity level has increased but is still within the relevant range.In terms of cost per unit of activity,you would expect which of the following statements to be true?

The following data pertain to activity and utilities costs for two recent years: Year 2 Year 1 Activity Level in Units 12,000 8,000 Utilities Cost \ 15,000 \ 12,000 Using the high-low method,what is the variable cost per unit for utilities?

Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the last five months of operations: Machine Hours Electrical Cost August 1,000 \ 1,620 September 900 1,510 October 1,500 1,870 November 2,000 1,950 December 1,300 1,730 -Using the high-low method,the estimated fixed cost per month for electricity is closest to which of the following?

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

Selected information about Buehler Corporation's operations at high and at low levels of activity follow: Level of Activity Low High Number of Units Produced 25,000 30,000 Total manufacturing \ 575,000 \ 680,000 overhead costs Direct material cost per unit \ 5 \ 5 Direct labour cost per unit \ 6 \ 6 Using the high-low method,what is the total variable cost per unit of product?

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 B?

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 Central Valley Company is a merchandising firm that sells a single product.The company's revenues and expenses for the last three months are presented below: CENTRAL VALLEY COMPANY Comparative Income Statement for the Second Quarter April May June Sales in units Sales revenue \ 630,000 \ 735,000 \ 840,000 Less: cost of goods sold 252,000 294,000 336,000 Gross margin 378,000 441,000 504,000 Less: operating expenses Shipping expense 56,000 63,500 71,000 Advertising expense 70,000 70,000 70,000 Salaries and 143,000 161,750 180,500 commissions Insurance expense 9,000 9,000 9,000 Depreciation expense Total operating expenses Net income \ 58,000 \ 94,750 \ 131,500 Required: a.Determine which expenses are mixed and,by use of the high-low method,separate each mixed expense into its variable and fixed components.State the cost formula for each mixed expense. b.Compute the company's total contribution margin for May.

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 A?

The contribution approach to constructing an income statement emphasizes the functions of production,administration and sales.