Exam 6: Cost Behavior

Discuss and compare absorption costing income statements with variable costing income statements.In your discussion,address the following questions: a.What is the main difference between the two methods? B)Under what circumstances will the operating income under each method be the same? C)What situation will cause the absorption costing income to be higher than the variable costing income? D)What situation will cause the absorption costing income to be lower than the variable costing income? E)Why would a company use absorption costing to prepare its income statements? F)Why would a company use variable costing to prepare its income statements?

The high-low method uses only two of the historical data points for estimating a cost equation

Under absorption costing,all nonmanufacturing costs are treated as period costs.

Flavio's Fitness Club provides monthly memberships as well as personal training sessions.The personal trainers earn 50% of the revenue for all personal training sessions.The Fitness Club also sells nutrition products.Flavio's general ledger accounts indicate the following for the year.The front desk staff wages expense remains the same throughout the year. Account Amount Account Amount Membership revenue \ 125,000 Personal trainer wages expense ? Persunal training revenue \ 60,000 Space rental expense \ 12,000 Product sales \ 65,000 Straight line depreciation expense \ 6,000 Cost of product sold \ 40,000 Rental insurance expense \ 3,000 Frant desk staff wages expense \ 12,000 -If a contribution margin income statement is prepared for the year,what is operating income?

Flavio's Fitness Club provides monthly memberships as well as personal training sessions.The personal trainers earn 50% of the revenue for all personal training sessions.The Fitness Club also sells nutrition products.Flavio's general ledger accounts indicate the following for the year.The front desk staff wages expense remains the same throughout the year. Account Amount Account Amount Membership revenue \ 125,000 Personal trainer wages expense ? Personal training revenue \ 60,000 Space rental expense \ 12,000 Product sales \ 65,000 Straight line depreciation expense \ 6,000 Cost of product sold \ 40,000 Rental insurance expense \ 3,000 Front desk staff wages expense \ 12,000 - If a contribution margin income statement is prepared for the year,what is the amount of total revenue?

Using account analysis,what type of cost is a student activity pass that costs $50 plus $5.00 per event?

Zucca Company has a contribution margin per unit of $54.If 6,000 more items are sold,and fixed expenses remain the same,the net change in operating income will be:

An equation of a line for all costs is:

Jeppson Company manufactures computer hard drives.The following data is related to sales and production of the computer hard drives for last year. Selling price per unit \ 100.00 Variable manufacturing costs per unit \ 45.00 Variable selling and administrative expenses per unit \ 6.00 Fixed manufacturing overhead (in total) \ 30,000 Fixed selling and administrative expenses (in total) \ 8,000 Units produced during year 1,500 Units sold during year 1,200 Units in beginning inventory 0 -Using variable costing,what is the variable cost of goods available for sale for last month?

Managers whose bonuses are based on operating income have more incentive to increase inventory levels when variable costing is used than when absorption costing is used

Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 150,000 units.The variable cost per unit at 300,000 units is:

The following graphs indicate which type of cost behavior?

Preston Racquets manufactures tennis racquets.The following data are available for last month. Units in bepinging inventory 0 Units produced during year 1,200 racquets Units in ending inventory 200 racquets Sales comrissions per racquet \ 10.00 Fixed manufacturing coverhead \ 48,000 Fixed marketing expenses \ 12,000 Selling price per racquet \ 200 Variable manufacturing cost per racquet \ 110 -Using variable costing,what is the variable cost of goods available for sale for last month?

An R-square value over .80 generally indicates that the cost equation is very reliable for predicting costs at other volumes within the relevant range.

When using the high-low method,what data point can be used to solve for the fixed cost component?

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

Suzy's Cool Treatz is a snow cone stand near the local park.To plan for the future,the owner wants to determine her cost behavior patterns.She has the following information available about her operating costs and the number of snow cones served. Month Number of snow cones Total qperating costs January 3,500 February 3,800 \ 4,800 March 5,000 \ 6,800 April 3,600 \ 5,450 May 4,700 \ 6,200 June 4,250 \ 5,950 Suzy uses the high-low method to determine her operating cost equation and sells 4,500 cones in a month for $3.00 each. -What would her contribution margin be if she prepared a contribution margin income statement for a month?

To follow is information about the units produced and total manufacturing costs for Snow Enterprises for the past six months. Month Number of units produced Total manufacturing costs January 7,940 \ 5,900 February 7,500 \ 5,460 March 6,400 \ 5,000 April 6,600 \ 5,500 May 4,740 \ 5,100 June 7,800 \ 5,840 -Using the high-low method,what will the total monthly manufacturing costs be if the company produces 7,500 units?

Jeppson Company manufactures computer hard drives.The following data is related to sales and production of the computer hard drives for last year. Selling price per unit \ 100.00 Variable manufacturing costs per unit \ 45.00 Variable selling and administrative expenses per unit \ 6.00 Fixed manufacturing overhead (in total) \ 30,000 Fixed selling and administrative expenses (in total) \ 8,000 Units produced during year 1,500 Units sold during year 1,200 Units in beginning inventory 0 - Using variable costing,what is the operating income for last month?

The Clauson Company has total fixed costs of $400,000.They also have $120,000 in total variable costs.These costs exist at a production level of 80,000 units.The fixed cost per unit is: