Exam 3: Cost Behavior: Analysis and Use

The Central Valley Company is a merchandising firm that sells a single product.The company's revenues and expenses for the last three months are given below: Required: a.Determine which expenses are mixed and,by use of the high-low method,separate each mixed expense into its variable and fixed components.State the cost formula for each mixed expense. b.Compute the company's total contribution margin for May.

The management of Harlow Corporation,a manufacturing company,would like your help in contrasting the traditional and contribution approaches to the income statement.The company has provided the following financial data for January: The company had no beginning or ending inventories. -The gross margin for January was:

Stewart Company is attempting to classify costs according to their cost behavior.Data concerning activity and costs are listed below: -If Stewart Company sells 1,150 units in March and this activity is within the relevant range,the expected total cost would most likely be closest to:

Maxwell Company has a total expense per unit of $2.00 per unit at the 16,000 level of activity and total expense per unit of $1.95 at the 21,000 unit level of activity. -The best estimate of the total fixed cost per period for Maxwell Company is:

The controller of JoyCo has requested a quick estimate of the manufacturing supplies needed for the month of July when production is expected to be 470,000 units.Below are actual data from the prior three months of operations. Using these data and the high-low method,what is the best estimate of the cost of manufacturing supplies that would be needed for July? (Assume that this activity is within the relevant range. )

An increase in the activity level within the relevant range results in:

Prater Company has provided the following data: -The best estimate of the company's total fixed selling and administrative expense per year is:

The cost of goods sold in a retail store totaled $325,000.Fixed selling and administrative expenses totaled $115,000 and variable selling and administrative expenses were $210,000.If the store's contribution margin totaled $590,000,then sales must have been:

Sibrel Inc. ,a manufacturing company,has provided the following financial data for September: The company had no beginning or ending inventories. Required: a.Prepare an income statement in good form for September using the traditional approach. b.Prepare an income statement in good form for September using the contribution approach.

At an activity level of 9,600 machine-hours in a month,Montgomery Corporation's total variable production engineering cost is $402,336 and its total fixed production engineering cost is $570,240.What would be the total production engineering cost,both fixed and variable,at an activity level of 9,900 machine-hours in a month? Assume that this level of activity is within the relevant range.

The relevant range concept is not applicable to mixed costs.

Prater Company has provided the following data: -The best estimate of the company's variable selling and administrative expense per unit is:

The high-low method is generally less accurate than the least-squares regression method for analyzing the behavior of mixed costs.

The management of Degenhart Corporation,a manufacturing company,has provided the following data for February: The contribution margin for February was:

Iacopi Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $172.50 per unit. The best estimate of the total contribution margin when 4,300 units are sold is:

Bacho Corporation reports that at an activity level of 5,400 units,its total variable cost is $416,934 and its total fixed cost is $142,560. -What would be the average fixed cost per unit at an activity level of 5,500 units? Assume that this level of activity is within the relevant range.

A clothing manufacturer incurred the following factory maintenance costs: 2,100 units produced with maintenance cost of $61,500,and 750 units produced with maintenance cost of $41,250.How much of the maintenance cost is made up of fixed cost? (Use the high-low method. )

Inspection costs at one of Pulley Corporation's factories are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. -Using the high-low method,the estimate of the fixed component of inspection cost per month is closest to:

Haram Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $182.10 per unit. The best estimate of the total variable cost per unit is:

Fixed cost per unit increases as activity decreases and decreases as activity increases.