Question 1

The "averaging method" is a method that may be used to separate mixed costs into fixed and variable components.

Accepted Answer

A) True 
 B)False

Question 2

The graph of a total variable cost will be a horizontal line.

Accepted Answer

A) True 
 B)False

Question 3

The cost equation determined using the high-low method should be the same as the cost equation determined using regression analysis.

Accepted Answer

A) True 
 B)False

Question 4

A scatter plot will not help managers identify potential outliers.

Accepted Answer

A) True 
 B)False

Question 5

Indirect materials would likely be classified as fixed costs.

Accepted Answer

A) True 
 B)False

Question 6

Sunny's Frozen Treats is a snow cone stand near the local park.To plan for the future,Sunny wants to determine his cost behavior patterns.He has the following information available about his operating costs and the number of snow cones served. $$\begin{array} { | l | c | c | } 
\hline \text { Month } & \text { Number of snow cones } & \text { Total operating costs } \
\hline \text { January } & 7,200 & \$ 4,700 \
\hline \text { February } & 8,000 & \$ 5,800 \
\hline \text { March } & 6,000 & \$ 4,600 \
\hline \text { April } & 6,600 & \$ 4,500 \
\hline \text { May } & 7,700 & \$ 5,100 \
\hline \text { June } & 7,250 & \$ 5,000 \
\hline
\end{array}$$
- Using the high-low method,the monthly operating costs-if Sunny sells 7,500 snow cones in a month-are:

Accepted Answer

A) $9,300. 
B) $5,500. 
C) $1,000. 
D) $4,500. 
A) $9,300. 
B) $5,500. 
C) $1,000. 
D) $4,500.

Question 7

Sugartown Corporation has total sales revenues of $225,000.If their total fixed costs are $40,000 and their total variable costs are $65,000,then the total contribution margin is:

Accepted Answer

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

Question 8

Preston Racquets manufactures tennis racquets.The following data are available for last month. $$\begin{array} { | l | r | } 
\hline \text { Units in bepinging inventory } & 0 \
\hline \text { Units produced during year } & 1,200 \text { racquets } \
\hline \text { Units in ending inventory } & \text { 200 racquets } \
\hline \text { Sales comrissions per racquet } & \$ 10.00 \
\hline \text { Fixed manufacturing coverhead } & \$ 48,000 \
\hline \text { Fixed marketing expenses } & \$ 12,000 \
\hline \text { Selling price per racquet } & \$ 200 \
\hline \text { Variable manufacturing cost per racquet } & \$ 110 \
\hline
\end{array}$$
- Using absorption costing,what is gross profit for last month?

Accepted Answer

A) $ 90,000 
B) $200,000 
C) $350,000 
D) $ 50,000 
A) $ 90,000 
B) $200,000 
C) $350,000 
D) $ 50,000

Question 9

Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 when it produces 2,000 birdhouses.If $4,800 of the costs are fixed,and the plant manager uses the average cost per unit to predict total costs,his forecast for 2,200 birdhouses will be:

Accepted Answer

A) $ 44,000. 
B) $ 43,520. 
C) $ 4,000. 
D) $ 40,000. 
A) $ 44,000. 
B) $ 43,520. 
C) $ 4,000. 
D) $ 40,000.

Question 10

In the equation y = $9.90x + $120,014:

Accepted Answer

A) $120,014 are the total variable costs. 
B) $120,014 are the total fixed costs. 
C) $120,014 are the total costs. 
D) $120,014 are the total overhead costs. 
A) $120,014 are the total variable costs. 
B) $120,014 are the total fixed costs. 
C) $120,014 are the total costs. 
D) $120,014 are the total overhead costs.

Question 11

Absorption costing is required by:

Accepted Answer

A) federal income tax reports. 
B) external financial reports,but not income taxes. 
C) both external financial reports and income tax reports. 
D) neither external financial reports nor income tax reports. 
A) federal income tax reports. 
B) external financial reports,but not income taxes. 
C) both external financial reports and income tax reports. 
D) neither external financial reports nor income tax reports.

Question 12

Variable costing considers fixed manufacturing costs as inventoriable product costs.

Accepted Answer

A) True 
 B)False

Question 13

The equation for a straight line is y = vx + f.

Accepted Answer

A) True 
 B)False

Question 14

The contribution margin is equal to:

Accepted Answer

A) sales minus cost of goods sold. 
B) sales minus variable expenses. 
C) sales minus fixed expenses. 
D) sales minus operating expenses. 
A) sales minus cost of goods sold. 
B) sales minus variable expenses. 
C) sales minus fixed expenses. 
D) sales minus operating expenses.

Question 15

Net income reported under absorption costing will exceed net income reported under variable costing for a given period if:

Accepted Answer

A) production equals sales for that period. 
B) production exceeds sales for that period. 
C) sales exceed production for that period. 
D) variable overhead exceeds fixed overhead for that period. 
A) production equals sales for that period. 
B) production exceeds sales for that period. 
C) sales exceed production for that period. 
D) variable overhead exceeds fixed overhead for that period.

Question 16

Maxwell Corporation is trying to predict its manufacturing overhead costs for the upcoming year; they are debating the use of the high-low method versus the use of regression analysis.They have gathered information about their manufacturing overhead costs in each of the past six months.A table containing their cost data and the associated machine hours in each month (the cost driver)follows.
 $\begin{array}{|c|c|c|c|}
\hline \text { Month } & \text { Manufacturing } & \text { overhead costs } & \text { Number of machine hours } \
\hline \text { April } & \$ & 22,000 & 12,250 \
\hline \text { May } & \$ & 22,860 & 12,510 \
\hline \text { June } & \$ & 21,600 & 11,280 \
\hline \text { July } & \$ & 21,800 & 11,410 \
\hline \text { August } & \$ & 21,250 & 10,980 \
\hline \text { September } & \$ & 21,930 & 11,670 \
\hline
\end{array}$
 The company performed a regression analysis using the above data and had the following results.(Note: the results are excerpts so not all of the regression analysis results are presented.)
   Required:
a.What is the cost equation if the high-low method is used to estimate costs?
b.Using the high-low method,predict total manufacturing overhead costs if Maxwell Corporation uses 12,000 hours.
c.What is the cost equation if regression analysis is used to estimate costs (use the results from the regression analysis provided)?
d.Using the results from the regression analysis provided,predict total manufacturing overhead costs if Maxwell Corporation uses 12,000 hours.
e.Which method (high-low or regression analysis)is a better predictor of total manufacturing overhead costs? Why?

Accepted Answer

a.  
 e.The regression analysis will gen

Question 17

Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 at a production level of 2,000 birdhouses.What is the total cost of producing 2,000 birdhouses?

Accepted Answer

A) $20.00 
B) $2,020 
C) $40,000 
D) $100 
A) $20.00 
B) $2,020 
C) $40,000 
D) $100

Question 18

Debby's Gift Baskets sells gift baskets,on average,for $100.Each gift basket costs,on average,$55.Debby pays salaries each month of $1,500,and her store rent is $1,000 per month.She also pays sales commissions of 10% of the sales price.In May,150 gift baskets were sold.
Required:
a.Prepare a traditional income statement for the month of May.
b.Prepare a contribution margin income statement for the month of May.

Accepted Answer

None

Question 19

When the number of units produced is less than the number of units sold,how does operating income under variable costing differ from operating income under absorption costing?

Accepted Answer

A) It is lower than operating income under absorption costing. 
B) It is the same as operating income under absorption costing. 
C) It is higher than operating income under absorption costing. 
D) It depends upon the amount of decline. 
A) It is lower than operating income under absorption costing. 
B) It is the same as operating income under absorption costing. 
C) It is higher than operating income under absorption costing. 
D) It depends upon the amount of decline.

Question 20

Jeppson Company manufactures computer hard drives.The following data is related to sales and production of the computer hard drives for last year. $\begin{array}{|l|c|}
\hline \text { Selling price per unit } & \$ 100.00 \
\hline \text { Variable manufacturing costs per unit } & \$ 45.00 \
\hline \text { Variable selling and administrative expenses per unit } &\$ 6.00 \
\hline \text { Fixed manufacturing overhead (in total) } & \$ 30,000 \
\hline \text { Fixed selling and administrative expenses (in total) } & \$ 8,000 \
\hline \text { Units produced during year } & 1,500 \
\hline \text { Units sold during year } & 1,200 \
\hline\text { Units in beginning inventory }&0\
\hline
\end{array}$
 
-Using absorption costing,what is cost of goods sold for last month?

Accepted Answer

A) $ 24,000 
B) $120,000 
C) $ 97,500 
D) $ 78,000 
A) $ 24,000 
B) $120,000 
C) $ 97,500 
D) $ 78,000

The "averaging method" is a method that may be used to separate mixed costs into fixed and variable components.

The graph of a total variable cost will be a horizontal line.

The cost equation determined using the high-low method should be the same as the cost equation determined using regression analysis.

A scatter plot will not help managers identify potential outliers.

Indirect materials would likely be classified as fixed costs.

Sugartown Corporation has total sales revenues of $225,000.If their total fixed costs are $40,000 and their total variable costs are $65,000,then the total contribution margin is:

Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 when it produces 2,000 birdhouses.If $4,800 of the costs are fixed,and the plant manager uses the average cost per unit to predict total costs,his forecast for 2,200 birdhouses will be:

In the equation y = $9.90x + $120,014:

Absorption costing is required by:

Variable costing considers fixed manufacturing costs as inventoriable product costs.

The equation for a straight line is y = vx + f.

The contribution margin is equal to:

Net income reported under absorption costing will exceed net income reported under variable costing for a given period if:

Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 at a production level of 2,000 birdhouses.What is the total cost of producing 2,000 birdhouses?

When the number of units produced is less than the number of units sold,how does operating income under variable costing differ from operating income under absorption costing?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, lean Production, and the Costs of Quality

Process Costing

Cost-Volume-Profit Analysis

Short Term Business Decisions

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 6: Cost Behavior

The "averaging method" is a method that may be used to separate mixed costs into fixed and variable components.

The graph of a total variable cost will be a horizontal line.

The cost equation determined using the high-low method should be the same as the cost equation determined using regression analysis.

A scatter plot will not help managers identify potential outliers.

Indirect materials would likely be classified as fixed costs.

Sugartown Corporation has total sales revenues of $225,000.If their total fixed costs are $40,000 and their total variable costs are $65,000,then the total contribution margin is:

Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 when it produces 2,000 birdhouses.If $4,800 of the costs are fixed,and the plant manager uses the average cost per unit to predict total costs,his forecast for 2,200 birdhouses will be:

In the equation y = $9.90x + $120,014:

Absorption costing is required by:

Variable costing considers fixed manufacturing costs as inventoriable product costs.

The equation for a straight line is y = vx + f.

The contribution margin is equal to:

Net income reported under absorption costing will exceed net income reported under variable costing for a given period if:

Feathered Nests produces decorative birdhouses.The company's average cost per unit is $20.00 at a production level of 2,000 birdhouses.What is the total cost of producing 2,000 birdhouses?

When the number of units produced is less than the number of units sold,how does operating income under variable costing differ from operating income under absorption costing?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Activity-Based Costing, lean Production, and the Costs of Quality

Process Costing

Cost-Volume-Profit Analysis

Short Term Business Decisions

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Filters