Exam 5: Cost Behavior

Which of the following is most likely to be classified as a variable cost?

As production goes up, total fixed costs ____.

Blue Ridge Resorts has the following pretax information available for the current year: Assuming all receipts are taxable and all costs are tax-deductible, what will be Blue Ridge's after-tax net income for the year if their tax rate is 30%?

Briefly describe the difference between fixed, variable, and mixed costs. Give one example of each.

Jameson Inc. plans to double its rental space next year, which will increase its fixed costs by 15%. Current year costs include variable costs of $14.5 per unit and fixed costs of $850,000. With the expansion of the rental space, next year's production is expected to be 7,000 units. Required: Calculate total estimated costs for next year.

You run a regression analysis and receive the following results: Required:

For each of the following statements, fill in the blank with either the word increase, decrease, or stay the same.

Which of the following statements is false regarding regression analysis?

Richardson Corporation plans to increase its advertising budget by 20% next year. The company currently spends $15,000 on advertising costs. In addition to advertising, Richardson spends $50,000 per year for other fixed costs and $10 per unit for variable costs. If Richardson anticipates producing 30,000 units next year, what will be next year's total costs? Required: Calculate total estimated costs for next year.

As production decreases, variable costs per unit ____.

Cool Creams Cool Creams provided the following data for number of ice creams produced and its total overhead costs for past five months: Refer to the information provided for Cool Creams. Using the high/low method, what is the variable cost per unit?

Describe regression analysis and list several of its possible uses.

Reliable Movers Inc. documented the miles driven and total moving van costs for the past five months as follows: In order to budget total vehicle costs for the upcoming summer months, Reliable wishes to estimate total vehicle costs using the high/low method. Required:

Denver Manufacturing Denver Manufacturing would like to do a better job budgeting for maintenance costs and, consequently, they have prepared a schedule showing maintenance costs and units produced for the past five months as follows: Refer to the Denver Manufacturing information above. Using the high/low method, if Denver expects to produce 5,000 units in June, what will be budgeted total maintenance costs?

B & B Manufacturing produces a single product. Last year, the company produced 10,000 units out of which 9,500 were sold. There were no units in beginning inventory. The company had the following costs: Refer to the information provided for B & B Manufacturing. What is the unit product cost using variable costing?

Which of the following statements is false regarding variable costing?

Denver Manufacturing Denver Manufacturing would like to do a better job budgeting for maintenance costs and, consequently, they have prepared a schedule showing maintenance costs and units produced for the past five months as follows: Refer to the Denver Manufacturing information above. Using the high/low method, what is the cost equation to predict total maintenance costs?

Regression Analysis 2 You run a regression analysis and receive the following results: Refer to the Regression Analysis 2 above. What would be the equation to predict total mixed costs?

In the cost equation, y = $500 + $5.40x, $500 represents:

Which of the following statements is true regarding regression analysis?