Question 1

The contribution margin is calculated by taking total sales revenue minus total fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 5-1
Presented below are the production data for the mixed costs incurred by Clarion Company.
   Clarion Company uses the high-low method to estimate mixed costs.
-Refer to Exhibit 5-1.How would the cost function be stated using the high-low method?

Accepted Answer

A) Y = $3,700 + $1.00X 
B) Y = $9,500 + $1.00X 
C) Y = $1,000 + $1.00X 
D) Y = $3,700 + $1.10X 
E) None of the answer choices is correct. 
A) Y = $3,700 + $1.00X 
B) Y = $9,500 + $1.00X 
C) Y = $1,000 + $1.00X 
D) Y = $3,700 + $1.10X 
E) None of the answer choices is correct.

Question 3

Cost estimates made using activity levels outside the relevant range:

Accepted Answer

A) Are more accurate. 
B) May result in poor decisions. 
C) Mean that cost behavior patterns are accurate at all levels of activity. 
D) Mean the cost estimates will be relevant. 
E) None of the answer choices is correct. 
A) Are more accurate. 
B) May result in poor decisions. 
C) Mean that cost behavior patterns are accurate at all levels of activity. 
D) Mean the cost estimates will be relevant. 
E) None of the answer choices is correct.

Question 4

Regression analysis and the high-low method often result in the same fixed and variable cost estimates because both approaches use the same data.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following represents total variable costs?

Accepted Answer

A) v 
B) vX 
C) f + vX 
D) f 
E) None of the answer choices is correct. 
A) v 
B) vX 
C) f + vX 
D) f 
E) None of the answer choices is correct.

Question 6

Exhibit 5-3
Hayley Inc.is using the account analysis approach to identify the cost behavior of production costs for one month.The production manager was asked to review these costs and provide her best guess as to how they should be categorized.Hayley produced 200 units for the month.She responded with the following information.
  
-Refer to Exhibit 5-3.Assume Hayley intends to produce 180 units next month.Using the account analysis approach,which of the following is the correct estimate of the total production costs for the month?

Accepted Answer

A) $740,000 
B) $720,000 
C) $738,000 
D) $820,000 
E) None of the answer choices is correct. 
A) $740,000 
B) $720,000 
C) $738,000 
D) $820,000 
E) None of the answer choices is correct.

Question 7

The high-low method is one of the most accurate methods for estimating costs,because its estimates are based on the data set as a whole.

Accepted Answer

A) True 
 B)False

Question 8

Variable costs such as direct labor and direct materials typically stay constant on a per unit basis.

Accepted Answer

A) True 
 B)False

Question 9

The following regression analysis output is for Watson Company's cost of paying sales people salary plus commission as a percent of sales on a monthly basis:
   
a.Use the regression output above to develop the cost equation Y = f + vX.
b.What would be Watson's estimated costs if it had sales of $2,000,000 next month?
c.What concerns would you have if Watson's CEO wanted you to compute estimated costs based on $8,000,000 sales for next month,when sales amounts have never exceeded $3,000,000?

Accepted Answer

The answer of The following regression analysis output is for...

Question 10

Which of the following assumptions are typically made when estimating costs?

Accepted Answer

A) Costs are nonlinear and costs estimated for a specific level of activity are within the relevant range. 
B) Costs are linear and costs estimated for a specific level of activity are within the relevant range. 
C) Costs are nonlinear and total costs never exceed fixed costs. 
D) Costs are linear and total costs never exceed variable costs. 
E) None of the answer choices is correct. 
A) Costs are nonlinear and costs estimated for a specific level of activity are within the relevant range. 
B) Costs are linear and costs estimated for a specific level of activity are within the relevant range. 
C) Costs are nonlinear and total costs never exceed fixed costs. 
D) Costs are linear and total costs never exceed variable costs. 
E) None of the answer choices is correct.

Question 11

Unusual data points are often called outliers.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 5-5
Tyler Incorporated sells 5,000 units per month with the following costs:
Variable costs: $1.25 per unit
Fixed costs: $3,000 per month
-Refer to Exhibit 5-5.What is Tyler's cost equation used to estimate total monthly costs?

Accepted Answer

A) Y = $3,000 + $1.25X 
B) Y = $3,000 - $1.25X 
C) Y = $3,000 / $1.25X 
D) Y = $3,000 + $1.25 + 5,000X 
E) None of the answer choices is correct. 
A) Y = $3,000 + $1.25X 
B) Y = $3,000 - $1.25X 
C) Y = $3,000 / $1.25X 
D) Y = $3,000 + $1.25 + 5,000X 
E) None of the answer choices is correct.

Question 13

The traditional income statement does not separate costs into fixed and variable components.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 5-2
Manchester Company is a small company that has hired you to help them estimate costs.They present you with the following information from the company's most recent fiscal year.
Sales (2,000 units)$1,000,000
Cost of goods sold (24% of sales)240,000
Store supervisor's annual salary 65,000
Annual operating costs 70,000
Annual advertising and promotion 10,000
Sales commissions (5% of sales)50,000
-Refer to Exhibit 5-2.What type of cost estimation method is being used for Manchester?

Accepted Answer

A) Regression analysis 
B) Scattergraph method 
C) Account analysis 
D) High-low method 
E) None of the answer choices is correct. 
A) Regression analysis 
B) Scattergraph method 
C) Account analysis 
D) High-low method 
E) None of the answer choices is correct.

Question 15

An example of a mixed cost would include salespersons who are paid salaries plus commissions based on sales dollars.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 5-7
Last month,Ellison Industries sold its product for $100 per unit.Fixed production costs were $50,000,and variable production costs amounted to $21 per unit.Fixed selling and administrative costs totaled $20,000,and variable selling and administrative costs amount to $3.00 per unit.Dawson produced and sold 6,000 units last month.
-Refer to Exhibit 5-7.Which of the following amounts represents total operating profit?

Accepted Answer

A) $424,000 
B) $600,000 
C) $386,000 
D) $404,000 
E) None of the answer choices is correct. 
A) $424,000 
B) $600,000 
C) $386,000 
D) $404,000 
E) None of the answer choices is correct.

Question 17

All of the following are steps for using the scattergraph method except:

Accepted Answer

A) estimating the total fixed costs. 
B) visually fitting a line to the data points,with at least one data point touching the line. 
C) identifying the high and low activity data points. 
D) plotting the data points for each period on a graph. 
E) None of the answer choices is correct. 
A) estimating the total fixed costs. 
B) visually fitting a line to the data points,with at least one data point touching the line. 
C) identifying the high and low activity data points. 
D) plotting the data points for each period on a graph. 
E) None of the answer choices is correct.

Question 18

All of the following statements are false regarding the scattergraph method except:

Accepted Answer

A) The scattergraph method only considers outlier points. 
B) The scattergraph method allows for review of all data points. 
C) The final cost equation using this method is not based on estimates. 
D) The scattergraph method yields less accurate results than the high-low method. 
E) None of the answer choices is correct. 
A) The scattergraph method only considers outlier points. 
B) The scattergraph method allows for review of all data points. 
C) The final cost equation using this method is not based on estimates. 
D) The scattergraph method yields less accurate results than the high-low method. 
E) None of the answer choices is correct.

Question 19

Exhibit 5-4
Wayside Company has machine hours of 5,000 and machine costs of $170,000 at the high data point.Machine hours are 2,000 and machine costs are $110,000 at the low data point.Wayside uses the high-low method to estimate costs.
-Refer to Exhibit 5-4.What is the estimate of total machine costs at Wayside when 3,700 machine hours are used?

Accepted Answer

A) $144,000 
B) $70,000 
C) $140,000 
D) $74,000 
E) None of the answer choices is correct. 
A) $144,000 
B) $70,000 
C) $140,000 
D) $74,000 
E) None of the answer choices is correct.

Question 20

Exhibit 5-7
Last month,Ellison Industries sold its product for $100 per unit.Fixed production costs were $50,000,and variable production costs amounted to $21 per unit.Fixed selling and administrative costs totaled $20,000,and variable selling and administrative costs amount to $3.00 per unit.Dawson produced and sold 6,000 units last month.
-Refer to Exhibit 5-7.Using a contribution margin income statement,which of the following amounts is the contribution margin?

Accepted Answer

A) $424,000 
B) $474,000 
C) $456,000 
D) $386,000 
E) None of the answer choices is correct. 
A) $424,000 
B) $474,000 
C) $456,000 
D) $386,000 
E) None of the answer choices is correct.

The contribution margin is calculated by taking total sales revenue minus total fixed costs.

Exhibit 5-1 Presented below are the production data for the mixed costs incurred by Clarion Company. Clarion Company uses the high-low method to estimate mixed costs. -Refer to Exhibit 5-1.How would the cost function be stated using the high-low method?

Cost estimates made using activity levels outside the relevant range:

Regression analysis and the high-low method often result in the same fixed and variable cost estimates because both approaches use the same data.

Which of the following represents total variable costs?

The high-low method is one of the most accurate methods for estimating costs,because its estimates are based on the data set as a whole.

Variable costs such as direct labor and direct materials typically stay constant on a per unit basis.

Which of the following assumptions are typically made when estimating costs?

Unusual data points are often called outliers.

Exhibit 5-5 Tyler Incorporated sells 5,000 units per month with the following costs: Variable costs: $1.25 per unit Fixed costs: $3,000 per month -Refer to Exhibit 5-5.What is Tyler's cost equation used to estimate total monthly costs?

The traditional income statement does not separate costs into fixed and variable components.

An example of a mixed cost would include salespersons who are paid salaries plus commissions based on sales dollars.

All of the following are steps for using the scattergraph method except:

All of the following statements are false regarding the scattergraph method except:

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Is Cost-Volume-Profit Analysis Used for Decision Making

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Do Managers Evaluate Performance in Decentralized Organizations

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

Filters

Exam 5: How Do Organizations Identify Cost Behavior Patterns

The contribution margin is calculated by taking total sales revenue minus total fixed costs.

Exhibit 5-1 Presented below are the production data for the mixed costs incurred by Clarion Company. Clarion Company uses the high-low method to estimate mixed costs. -Refer to Exhibit 5-1.How would the cost function be stated using the high-low method?

Cost estimates made using activity levels outside the relevant range:

Regression analysis and the high-low method often result in the same fixed and variable cost estimates because both approaches use the same data.

Which of the following represents total variable costs?

The high-low method is one of the most accurate methods for estimating costs,because its estimates are based on the data set as a whole.

Variable costs such as direct labor and direct materials typically stay constant on a per unit basis.

Which of the following assumptions are typically made when estimating costs?

Unusual data points are often called outliers.

Exhibit 5-5 Tyler Incorporated sells 5,000 units per month with the following costs: Variable costs: $1.25 per unit Fixed costs: $3,000 per month -Refer to Exhibit 5-5.What is Tyler's cost equation used to estimate total monthly costs?

The traditional income statement does not separate costs into fixed and variable components.

An example of a mixed cost would include salespersons who are paid salaries plus commissions based on sales dollars.

All of the following are steps for using the scattergraph method except:

All of the following statements are false regarding the scattergraph method except:

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Is Cost-Volume-Profit Analysis Used for Decision Making

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Do Managers Evaluate Performance in Decentralized Organizations

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

Filters