Question 1

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 a:

Accepted Answer

A) variable cost. 
B) fixed cost. 
C) step-fixed cost. 
D) semivariable cost. 
E) curvilinear cost.

Question 2

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

Accepted Answer

A) sloping straight line. 
B) jagged line. 
C) vertical straight line. 
D) curved line. 
E) horizontal straight linE.

Question 3

DuChien Corporation recently produced and sold 100,000 units.Fixed costs at this level of activity amounted to $50,000;variable costs were $100,000.How much cost would the company anticipate if during the next period it produced and sold 102,000 units?

Accepted Answer

A) $150,000. 
B) $151,000. 
C) $152,000. 
D) $153,000. 
E) Some other amount not listed abovE.

Question 4

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?

Accepted Answer

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Question 5

The fixed utilities cost per month is:

Accepted Answer

A) $3,764. 
B) $4,400. 
C) $4,760. 
D) $5,100. 
E) an amount other than those listed abovE.

Question 6

Bowman,Inc. ,has only variable costs and fixed costs.A review of the company's records disclosed that when 200,000 units were produced,fixed manufacturing costs amounted to $800,000 and the cost per unit manufactured totaled $11.On the basis of this information,how much cost would the firm anticipate at an activity level of 205,000 units?

Accepted Answer

A) $2,235,000. 
B) $2,222,000. 
C) $2,214,000. 
D) $2,200,000. 
E) Some other amount not listed abovE.

Question 7

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:

Accepted Answer

A) variable operating cost per delivery. 
B) fixed operating costs. 
C) number of deliveries. 
D) total variable operating costs. 
E) total operating costs.

Question 8

On the basis of this information,the variable cost per machine hour was:

Accepted Answer

A) $8.40. 
B) $22.00. 
C) $25.00. 
D) $30.40. 
E) $33.40.

Question 9

Swanson's variable cost per copy is:

Accepted Answer

A) $0.040. 
B) $0.051. 
C) $0.053. 
D) $0.056. 
E) an amount other than those given abovE.

Question 10

When graphed,a typical step-fixed cost appears as:

Accepted Answer

A) a horizontal line. 
B) a vertical line. 
C) a series of staggered horizontal lines 
D) a diagonal line that slopes downward to the right. 
E) a diagonal line that slopes upward to the right.

Question 11

Northlake,Inc. ,uses the high-low method to analyze cost behavior.The company observed that at 20,000 machine hours of activity,total maintenance costs averaged $10.50 per hour.When activity jumped to 24,000 machine hours,which was still within the relevant range,the average total cost per machine hour was $9.75.On the basis of this information,the company's fixed maintenance costs were:

Accepted Answer

A) $24,000. 
B) $90,000. 
C) $210,00. 
D) $234,000. 
E) an amount other than those listed abovE.

Question 12

Differentiate between committed costs and discretionary costs.Be sure to present two examples of each and explain which of the two cost types would likely be cut should a company encounter financial difficulties.

Accepted Answer

The answer of Differentiate between committed costs and discretionary costs.Be...

Question 13

Package Express,Inc.operates a small package delivery service in the Jacksonville suburbs.If the company uses a regression equation to forecast total operating costs,the coefficient of the equation's independent variable would correspond to the:

Accepted Answer

A) variable operating cost per delivery. 
B) fixed operating costs. 
C) number of deliveries. 
D) total variable operating costs. 
E) total operating costs.

Question 14

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?

Accepted Answer

A) The company anticipates $329,000 of fixed selling expenses. 
B) "Y" represents total selling expenses. 
C) The company expects both variable and fixed selling expenses. 
D) For each unit sold,total selling expenses will increase by $7.80. 
E) "X" represents the number of hours worked during the period.

Question 15

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

Accepted Answer

A) Least-squares regression. 
B) High-low method. 
C) Visual-fit method. 
D) Linear programming. 
E) Multiple regression.

Question 16

Parker Corporation observed that when 25,000 units were sold,a particular cost amounted to $75,000,or $3.00 per unit.When volume increased by 10%,the cost totaled $82,500 (i.e. ,$3.00 per unit).The cost that Parker is studying can best be described as a:

Accepted Answer

A) variable cost. 
B) fixed cost. 
C) semivariable cost. 
D) discretionary fixed cost. 
E) step-fixed cost.

Question 17

Ai Corporation extracts ore for eight different companies in Colorado.The firm anticipates variable costs of $65 per ton along with annual fixed overhead of $840,000,which is incurred evenly throughout the year.These costs exclude the following semivariable costs,which are expected to total the amounts shown for the high and low points of ore extraction activity:
March (850 tons): $39,900
August (1,300 tons): $46,200
A-1 uses the high-low method to analyze cost behavior.
Required:
A.Calculate the semivariable cost for an upcoming month when 875 tons will be extracted.
B.Calculate the total cost for that same month.
C.1.Step-fixed.
2.No.Notice that the bill will be $70,000 for A-1's tonnage,and the company could have Cortez haul up to 1,099 tons for the same cost.Ideally,Ai should try to move to the right side of the step to get a better return on its investment.
C.Ai uses Cortez Trucking to haul extracted ore.Cortez's monthly charges are as follows:
  
1.From a cost behavior perspective,what type of cost is this?
2.If Ai plans to extract 875 tons,is the company being very "cost effective" with respect to Cortez's billing rates? Briefly discuss.

Accepted Answer

The answer of Ai Corporation extracts ore for eight different...

Question 18

Using the high-low method,the utilities cost associated with 980 machine hours would be:

Accepted Answer

A) $9,510. 
B) $9,660. 
C) $9,700. 
D) $9,790. 
E) an amount other than those listed abovE.

Question 19

Define the term "relevant range" and explain its importance in understanding cost behavior.

Accepted Answer

The answer of Define the term "relevant range" and explain...

Question 20

Swanson's monthly fixed fee is:

Accepted Answer

A) $80. 
B) $102. 
C) $106. 
D) $112. 
E) an amount other than those given abovE.

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