Question 1

What data point can be used to solve for the fixed cost component when using the high-low method?

Accepted Answer

A) The "high" month 
B) Either the "high" or the "low" month 
C) The "low" month 
D) Any month in the data set 
A) The "high" month 
B) Either the "high" or the "low" month 
C) The "low" month 
D) Any month in the data set

Question 2

Which of the following represents the equation for total fixed costs?

Accepted Answer

A) y = f 
B) y = vx + f 
C) y = vx - f. 
D) none of the above 
A) y = f 
B) y = vx + f 
C) y = vx - f. 
D) none of the above

Question 3

A scatterplot will help managers identify potential outliers.

Accepted Answer

A) True 
 B)False

Question 4

Doggie Pals produces 110,000 dog collars each month that give off a fresh scent to keep your dog smelling clean between baths. Total manufacturing costs are $200,000. Of this amount, $100,000 are variable costs. What are the total production costs when 125,000 collars are produced? (Assume both production levels are in the same relevant range.)

Accepted Answer

A) $313,636 
B) $13,636 
C) $213,636 
D) $113,636 
A) $313,636 
B) $13,636 
C) $213,636 
D) $113,636

Question 5

Traditional income statements provide managers with little cost behavior information.

Accepted Answer

A) True 
 B)False

Question 6

The high-low method is theoretically better than regression analysis because the high-low method uses more data points than regression analysis.

Accepted Answer

A) True 
 B)False

Question 7

Which method are managers using when they use their judgment to classify costs as variable, fixed, or mixed?

Accepted Answer

A) High-low method 
B) Account analysis 
C) Regression analysis 
D) Low-high method 
A) High-low method 
B) Account analysis 
C) Regression analysis 
D) Low-high method

Question 8

The contribution margin income statement presents ________ above the contribution margin line.

Accepted Answer

A) only variable expenses relating to selling and administrative activities 
B) only fixed expenses relating to selling and administrative activities 
C) all fixed expenses 
D) all variable expenses 
A) only variable expenses relating to selling and administrative activities 
B) only fixed expenses relating to selling and administrative activities 
C) all fixed expenses 
D) all variable expenses

Question 9

Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $780. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1600 a month rent for his store, and also pays $5000 a month to his staff in addition to the commissions. Stanley sold 140 bicycles in June. If Stanley prepares a contribution margin income statement for the month of June, what would be his operating income?

Accepted Answer

A) $10,560 
B) $109,200 
C) $100,380 
D) $2220 
A) $10,560 
B) $109,200 
C) $100,380 
D) $2220

Question 10

Sugartown Corporation has total sales revenues of $930,000. If its total fixed costs are $182,000 and its total variable costs are $267,000, then the total contribution margin is

Accepted Answer

A) total revenue minus total fixed costs. 
B) total revenue minus total variable costs. 
C) total variable costs minus total fixed costs. 
D) equal to operating income. 
A) total revenue minus total fixed costs. 
B) total revenue minus total variable costs. 
C) total variable costs minus total fixed costs. 
D) equal to operating income.

Question 11

With respect to variable costs per unit, which of the following statements is true?

Accepted Answer

A) They will decrease as production increases within the relevant range. 
B) They will increase as production decreases within the relevant range. 
C) They will decrease as production decreases within the relevant range. 
D) They will remain the same as production levels change within the relevant range. 
A) They will decrease as production increases within the relevant range. 
B) They will increase as production decreases within the relevant range. 
C) They will decrease as production decreases within the relevant range. 
D) They will remain the same as production levels change within the relevant range.

Question 12

Under variable costing, fixed manufacturing costs are treated as inventoriable product costs.

Accepted Answer

A) True 
 B)False

Question 13

Regression analysis uses only two of the historical data points to estimate a cost equation.

Accepted Answer

A) True 
 B)False

Question 14

Hyper Color Company manufactures widgets. The following data is related to sales and production of the widgets for last year.   Using absorption costing, what is gross profit for last month? (Round any intermediary calculations to the nearest whole dollar.)

Accepted Answer

A) $296,800 
B) $182,000 
C) $2,265,200 
D) $67,200 
A) $296,800 
B) $182,000 
C) $2,265,200 
D) $67,200

Question 15

It costs Homer's Manufacturing $0.65 to produce baseballs and Homer sells them for $4.00 a piece. Homer pays a sales commission of 5% of sales revenue to his sales staff. Homer also pays $13,000 a month rent for his factory and store, and also pays $78,000 a month to his staff in addition to the commissions. Homer sold 71,500 baseballs in June. If Homer prepares a traditional income statement for the month of June, what would be his operating income?

Accepted Answer

A) $286,000 
B) $344,825 
C) $239,525 
D) $134,225 
A) $286,000 
B) $344,825 
C) $239,525 
D) $134,225

Question 16

When preparing a traditional income statement, fixed costs are subtracted from gross profit to arrive at operating income.

Accepted Answer

A) True 
 B)False

Question 17

Mixed costs are purely fixed.

Accepted Answer

A) True 
 B)False

Question 18

Scranton Printer Company would like to estimate its total manufacturing costs using regression analysis but is unsure whether machine hours or units produced would be a better predictor of total manufacturing costs.
Output from regression analysis using machine hours as the volume (cost driver)follows. Note: the results are excerpts so not all of the regression analysis results are presented.
   Output from a regression analysis using units produced as the volume (cost driver)follows. Again, the results are excerpts so not all of the regression analysis results are presented.
   Required:
a. What is the cost equation if machine hours is used as the volume (cost driver)?
b. Predict total manufacturing costs using machine hours as the volume (cost driver)if Scranton Paper Company uses 18,000 hours.
c. What is the cost equation if units produced is used as the volume (cost driver)?
d. Predict total manufacturing costs using units produced as the volume (cost driver)if Scranton Paper Company produces 65,000 units.
e. Which volume (cost driver)is a better predictor of total manufacturing costs? Why?

Accepted Answer

a.
y = $314,842.08 + $8.96x
b.
 @#IMG-DLM& c.
y =

Question 19

When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis, managers should consider

Accepted Answer

A) outliers. 
B) general inflation. 
C) seasonality. 
D) all of the above. 
A) outliers. 
B) general inflation. 
C) seasonality. 
D) all of the above.

Question 20

Using account analysis, what type of cost is the price of gasoline when your car gets 30 miles per gallon and each gallon costs $3.65?

Accepted Answer

A) Fixed 
B) Mixed 
C) Variable 
D) Step 
A) Fixed 
B) Mixed 
C) Variable 
D) Step

What data point can be used to solve for the fixed cost component when using the high-low method?

Which of the following represents the equation for total fixed costs?

A scatterplot will help managers identify potential outliers.

Traditional income statements provide managers with little cost behavior information.

The high-low method is theoretically better than regression analysis because the high-low method uses more data points than regression analysis.

Which method are managers using when they use their judgment to classify costs as variable, fixed, or mixed?

The contribution margin income statement presents ________ above the contribution margin line.

Sugartown Corporation has total sales revenues of $930,000. If its total fixed costs are $182,000 and its total variable costs are $267,000, then the total contribution margin is

With respect to variable costs per unit, which of the following statements is true?

Under variable costing, fixed manufacturing costs are treated as inventoriable product costs.

Regression analysis uses only two of the historical data points to estimate a cost equation.

Hyper Color Company manufactures widgets. The following data is related to sales and production of the widgets for last year. Using absorption costing, what is gross profit for last month? (Round any intermediary calculations to the nearest whole dollar.)

When preparing a traditional income statement, fixed costs are subtracted from gross profit to arrive at operating income.

Mixed costs are purely fixed.

When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis, managers should consider

Using account analysis, what type of cost is the price of gasoline when your car gets 30 miles per gallon and each gallon costs $3.65?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, Lean Operations, and the Costs of Quality

Process Costing

Cost-Volume-Profit Analysis

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evalulation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters

Exam 6: Cost Behavior

What data point can be used to solve for the fixed cost component when using the high-low method?

Which of the following represents the equation for total fixed costs?

A scatterplot will help managers identify potential outliers.

Traditional income statements provide managers with little cost behavior information.

The high-low method is theoretically better than regression analysis because the high-low method uses more data points than regression analysis.

Which method are managers using when they use their judgment to classify costs as variable, fixed, or mixed?

The contribution margin income statement presents ________ above the contribution margin line.

Sugartown Corporation has total sales revenues of $930,000. If its total fixed costs are $182,000 and its total variable costs are $267,000, then the total contribution margin is

With respect to variable costs per unit, which of the following statements is true?

Under variable costing, fixed manufacturing costs are treated as inventoriable product costs.

Regression analysis uses only two of the historical data points to estimate a cost equation.

Hyper Color Company manufactures widgets. The following data is related to sales and production of the widgets for last year. Using absorption costing, what is gross profit for last month? (Round any intermediary calculations to the nearest whole dollar.)

When preparing a traditional income statement, fixed costs are subtracted from gross profit to arrive at operating income.

Mixed costs are purely fixed.

When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis, managers should consider

Using account analysis, what type of cost is the price of gasoline when your car gets 30 miles per gallon and each gallon costs $3.65?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, Lean Operations, and the Costs of Quality

Process Costing

Cost-Volume-Profit Analysis

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evalulation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters