Exam 6: Activity Analysis, Cost Behavior, and Cost Estimation

Rachelle Hamilton has a fast-food franchise and must pay a franchise fee of $45,000 plus 4% of gross sales. In terms of cost behavior, the fee is known as a:

Within the relevant range, a curvilinear cost function can sometimes be graphed as a:

A forecast of a cost at a particular level of activity is known as:

Which of the following methods of cost estimation relies on only two data points?

A staff assistant at Whitmere Corporation recently determined that the first four units completed in a new manufacturing process took 800 hours to complete, or an average of 200 hours per unit. The assistant also found that when the cumulative output produced doubles, the average labor time declines by 20%. On the basis of this information, how many total hours would Washington use if it produces 16 units?

A company observed a decrease in the cost per unit. All other things being equal, which of the following is most likely true?

Compare and contrast the following types of costs: (1) variable and step-variable and (2) fixed and step-fixed.

Hot'lanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year: Month Utilities Machine Hours January \ 8,700 800 February 8,360 720 March 8,950 810 April 9,360 920 May 9,625 950 June 9,150 900 Using the high-low method, the utilities cost associated with 980 machine hours would be:

Which of the following choices correctly classifies a committed fixed cost and a discretionary fixed cost?

Southbend Medical Clinic offers a number of specialized medical services. A review of data for the year just ended revealed variable costs of $32 per patient day; annual fixed costs of $480,000, which are incurred evenly throughout the year; and semivariable costs that displayed the following behavior at the "peak" and "valley" of activity: January (2,400 patient days): $258,400 August (2,900 patient days): $278,900 Required: A. Calculate the total cost for an upcoming month (2,800 patient days) if current cost behavior patterns continue. Southbend uses the high-low method to analyze cost behavior. B. There is a high probability that Southbend's volume will increase in forthcoming months as patients take advantage of new scientific advances. Can the data and methodology used in part (a) for predicting the costs of 2,800 patient days be employed to estimate the costs for, say, 3,800 patient days? Why or why not?

Chambliss Corporation has three costs: A, which is variable; B, which is fixed; and C, which is semivariable. The company uses the high-low method and extracted the following data from its accounting records: • At 180,000 hours of activity, Cost A totaled $2,610,000. • At 140,000 hours, the low point during the period, Cost C totaled $1,498,000; at 200,000 hours, the high point, Cost C's fixed portion amounted to $1.75 per hour. • At 160,000 hours of activity, the sum of Costs A, B, and C amounted to $8,162,000. Required: A. Compute the variable portion (total) of Cost C at 140,000 hours of activity. B. Compute Cost C (total) at 160,000 hours of activity. C. Compute Cost B (total) at 160,000 hours of activity.

Booster, Inc. recently conducted a least-squares regression analysis to predict selling expenses. The company has constructed the following regression equation: Y = 329,000 + 7.80X. Which of the following statements is false if the primary cost driver is number of units sold?

When graphed, a typical fixed cost appears as:

Around Town, Inc. operates a small package delivery service in the Columbus suburbs. If the company uses a regression equation to forecast total operating costs, the equation's intercept would correspond to the:

The following data relate to the Lisle Company for May and August of the current year: May August Maintenance hours 25,000 29,000 Maintenance cost \ 1,175,000 \ 1,247,000 May and August were the lowest and highest activity levels, and Lisle uses the high-low method to analyze cost behavior. Which of the following statements is true?

Which of the following techniques is not used to analyze cost behavior?

Within the relevant range of activity, costs:

Hot'lanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year: Month Utilities Machine Hours January \ 8,700 800 February 8,360 720 March 8,950 810 April 9,360 920 May 9,625 950 June 9,150 900 The variable utilities cost per machine hour is:

Which type of fixed cost (1) tends to be more long-term in nature and (2) can be cut back more easily in bad economic times without doing serious harm to organizational goals and objectives?

Amounts spent for charitable contributions are an example of a (n):