Question 1

A cost formula may not be valid outside the relevant range of activity.

Accepted Answer

A) True 
 B)False  True

Question 2

What are discretionary fixed costs?

Accepted Answer

A)  They vary directly and proportionately with the level of activity. 
B)  They have a long-term planning horizon,generally encompassing many years. 
C)  They are made up of plant,equipment,and basic organizational costs. 
D)  None of these options. 
A)  They vary directly and proportionately with the level of activity. 
B)  They have a long-term planning horizon,generally encompassing many years. 
C)  They are made up of plant,equipment,and basic organizational costs. 
D)  None of these options. D

Question 3

Using the contribution approach,what is the operating income for the first quarter?

Accepted Answer

A)  $44,000. 
B)  $128,000. 
C)  $152,000. 
D)  $240,000. 
A)  $44,000. 
B)  $128,000. 
C)  $152,000. 
D)  $240,000. A

Question 4

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?

Accepted Answer

A)  $155,000. 
B)  $170,000. 
C)  $185,000. 
D)  $250,000. 
A)  $155,000. 
B)  $170,000. 
C)  $185,000. 
D)  $250,000.

Question 5

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

Accepted Answer

A)  The X term is the dependent variable. 
B)  The a term is the fixed component. 
C)  In the high-low method,the b term equals change in activity divided by change in costs. 
D)  As the X term increases,the Y term decreases. 
A)  The X term is the dependent variable. 
B)  The a term is the fixed component. 
C)  In the high-low method,the b term equals change in activity divided by change in costs. 
D)  As the X term increases,the Y term decreases.

Question 6

What is the total fixed overhead cost for O'Donnell?

Accepted Answer

A)  $55,000. 
B)  $60,000. 
C)  $115,000. 
D)  $130,000. 
A)  $55,000. 
B)  $60,000. 
C)  $115,000. 
D)  $130,000.

Question 7

The following is Allison Corporation's contribution format income statement for December 2013:   
The company had no beginning or ending inventories.The company produced and sold 10,000 units in December 2013.
Required:
Assuming no change in either the cost structure or the average selling price,prepare a contribution format income statement for a January,2014 assuming production and sales of 7,500 units for Allison Corporation.

Accepted Answer

Crucial step:Determining the required un

Question 8

At an activity level of 6,000 units,the cost for maintenance is $7,200;at 10,000 units,the cost for maintenance is $11,600.Using the high-low method,what is the cost formula for maintenance?

Accepted Answer

A)  $1.16 per unit. 
B)  $1.20 per unit. 
C)  $600 plus $1.10 per unit. 
D)  $1,200 plus $1.10 per unit.FC = 11,600 - 10,000 * .75 = $600 
A)  $1.16 per unit. 
B)  $1.20 per unit. 
C)  $600 plus $1.10 per unit. 
D)  $1,200 plus $1.10 per unit.FC = 11,600 - 10,000 * .75 = $600

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which costs will change with a decrease in activity within the relevant range?

Accepted Answer

A)  Total fixed costs and total variable costs. 
B)  Unit fixed cost and total variable costs. 
C)  Unit variable cost and unit fixed cost. 
D)  Unit fixed cost and total fixed costs. 
A)  Total fixed costs and total variable costs. 
B)  Unit fixed cost and total variable costs. 
C)  Unit variable cost and unit fixed cost. 
D)  Unit fixed cost and total fixed costs.

Question 12

(Appendix 3A)The Stephens Leadership Centre provides training seminars in personal development and time management.The company is relatively new and management is seeking information regarding the Centre's cost structure.The following information has been gathered since the inception of the business in January of the current year:   
Required:
a.Using the high-low method,estimate the variable cost per seminar and the total fixed cost per month.
b.Using the least-squares regression method and the equations for a and b,estimate the variable cost per seminar and the total fixed cost per month.

Accepted Answer

a.High-low method: @#IMG-DLM& 
Cost formula for se

Question 13

What is the contribution margin for Crandall's Bookstore for the first quarter?

Accepted Answer

A)  $128,000. 
B)  $152,000. 
C)  $240,000. 
D)  $688,000. 
A)  $128,000. 
B)  $152,000. 
C)  $240,000. 
D)  $688,000.

Question 14

Unified Parcel,Inc.operates a local parcel delivery service.The company keeps detailed records relating to operating costs of trucks,and has found that if a truck is driven 110,000 kilometres per year,the operating cost is 7.5 cents per kilometre.This cost increases to 8.75 cents per kilometre if a truck is driven 60,000 kilometres per year.
Required:
Estimate the cost formula for truck operating costs using the high-low method.

Accepted Answer

@#IMG-DLM& 
 @#IMG-DLM& 
 @#IMG-DLM& 
 @#IMG-DLM& The cost f

Question 15

What is the expected total administrative expense next month?

Accepted Answer

A)  $4,800. 
B)  $9,300. 
C)  $13,300. 
D)  $14,900. 
A)  $4,800. 
B)  $9,300. 
C)  $13,300. 
D)  $14,900.

Question 16

Suppose a firm reports the following results using the least-squares regression method:
Y = $750 - $2.56X
Y is the daily repair and maintenance cost and X is the daily units of production in hundreds.The daily observations were over a one-month period.The results do not make sense to the manager of the repair and maintenance department.
Required:
What is the most plausible explanation for the apparently meaningless results?

Accepted Answer

According to the results,total daily rep

Question 17

The 4 x 4 Shop is a large retailer of equipment for pickup trucks.An income statement for the company's Bed Liner Department for the most recent quarter is presented below:   
The liners sell,on average,for $350 each.The department's variable selling expenses are $35 per liner sold.The remaining selling expenses are fixed.The administrative expenses are 25% variable and 75% fixed.The company purchases its liners from a supplier at a cost of $125 per liner.
Required:
Prepare an income statement for the quarter,using the contribution approach.

Accepted Answer

The answer of The 4 x 4 Shop is a...

Question 18

Using the high-low method,the estimated fixed cost per month for electricity is closest to which of the following?

Accepted Answer

A)  $870.00. 
B)  $1,150.00. 
C)  $1,290.00. 
D)  $1,306.50. 
A)  $870.00. 
B)  $1,150.00. 
C)  $1,290.00. 
D)  $1,306.50.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  A training program for salespersons. 
B)  Executive travel expenses. 
C)  Property taxes on the factory building. 
D)  New product research and development. 
A)  A training program for salespersons. 
B)  Executive travel expenses. 
C)  Property taxes on the factory building. 
D)  New product research and development.

A cost formula may not be valid outside the relevant range of activity.

What are discretionary fixed costs?

Using the contribution approach,what is the operating income for the first quarter?

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?

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

What is the total fixed overhead cost for O'Donnell?

At an activity level of 6,000 units,the cost for maintenance is $7,200;at 10,000 units,the cost for maintenance is $11,600.Using the high-low method,what is the cost formula for maintenance?

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

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

Which costs will change with a decrease in activity within the relevant range?

What is the contribution margin for Crandall's Bookstore for the first quarter?

What is the expected total administrative expense next month?

Using the high-low method,the estimated fixed cost per month for electricity is closest to which of the following?

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

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

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 Online

Filters

Exam 3: Cost Behaviour: Analysis and Use

A cost formula may not be valid outside the relevant range of activity.

What are discretionary fixed costs?

Using the contribution approach,what is the operating income for the first quarter?

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?

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

What is the total fixed overhead cost for O'Donnell?

At an activity level of 6,000 units,the cost for maintenance is $7,200;at 10,000 units,the cost for maintenance is $11,600.Using the high-low method,what is the cost formula for maintenance?

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

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

Which costs will change with a decrease in activity within the relevant range?

What is the contribution margin for Crandall's Bookstore for the first quarter?

What is the expected total administrative expense next month?

Using the high-low method,the estimated fixed cost per month for electricity is closest to which of the following?

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

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

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 Online

Filters