Question 1

The high-low method basically fits a line through the highest and lowest ________ points.

Accepted Answer

A) fixed cost 
B) variable cost 
C) volume 
D) none of the above

Question 2

If inventory has grown,operating income will be higher under absorption costing than it is under variable costing.

Accepted Answer

A) True 
 B)False

Question 3

Total fixed costs for Randolph Manufacturing are $754,000.Total costs,including both fixed and variable,are $1,000,000 if 150,000 units are produced.The variable cost per unit is

Accepted Answer

A) $6.67/unit. 
B) $5.03/unit. 
C) $11.69/unit. 
D) $1.64/unit.

Question 4

The HF Corporation manufactures and sells toy gyroscopes.The following data is related to sales and production of the toy gyroscopes for last year.

Using variable costing,what is the operating income for last year?

Accepted Answer

A) $1,200,000 
B) $103,000 
C) $413,000 
D) $258,000

Question 5

Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $750.He pays a sales commission of 15% of sales revenue to his sales staff.Stanley pays $1,400 a month rent for his store,and also pays $3,000 a month to his staff in addition to the commissions.Stanley sold 120 bicycles in June.If Stanley prepares a contribution margin income statement for the month of June,what would be his contribution margin?

Accepted Answer

A) $4,500 
B) $90,000 
C) $85,500 
D) $175,500

Question 6

In a regression output,the "intercept coefficient" represents the fixed cost component of a mixed cost equation.

Accepted Answer

A) True 
 B)False

Question 7

During the current period,14,000 units were produced and 12,000 units were sold.Fixed manufacturing costs incurred amounted to $126,000.An absorption costing income statement would report fixed manufacturing costs as which of the following?

Accepted Answer

A) Costs of $108,000 as a deduction from gross profit to obtain operating income 
B) Overhead of $126,000 as a deduction from sales revenue to obtain gross profit 
C) Overhead of $108,000 as a deduction from sales revenue to obtain gross profit 
D) Costs of $126,000 as a deduction from sales revenue to obtain contribution margin

Question 8

Tasty Treats is a snow cone stand near the local park.To plan for the future,it wants to determine its cost behavior patterns.It has the following information available about its operating costs and the number of snow cones served.

Using the high-low method,the monthly operating costs-if Sunny sells 8,000 snow cones in a month-are

Accepted Answer

A) $7,100. 
B) $5,600. 
C) $10,920. 
D) $1,500.

Question 9

Using account analysis,what type of cost is the rental of a space at $6,000 per month?

Accepted Answer

A) Mixed 
B) Fixed 
C) Step 
D) Variable

Question 10

Which of the following would be considered a discretionary fixed cost?

Accepted Answer

A) Property taxes and insurance 
B) Advertising 
C) Employees wages 
D) Depreciation

Question 11

The income statement is organized by ________ under absorption costing.

Accepted Answer

A) period costs only 
B) fixed costs only 
C) variable costs only 
D) product and period costs

Question 12

The following data pertain to costs at Summit Company:

The fixed cost per unit is

Accepted Answer

A) $3.75. 
B) $15.00. 
C) $18.75. 
D) $11.25.

Question 13

The cost of goods sold is a variable cost for merchandise company,but contains a mixture of variable and fixed production costs for manufacturers.

Accepted Answer

A) True 
 B)False

Question 14

What will happen to the contribution margin if fixed costs related to a product increase while variable costs and sales price remain constant?

Accepted Answer

A) Will increase 
B) Will not change 
C) Will decrease 
D) None of the above

Question 15

Schrute Farm Sales buys portable generators for $450 and sells them for $720.He pays a sales commission of 5% of sales revenue to his sales staff.Mr.Schrute pays $2,000 a month rent for his store,and also pays $1,700 a month to his staff in addition to the commissions.Mr.Schrute sold 200 generators in June.If Mr.Schrute prepares a contribution margin income statement for the month of June,what would be his contribution margin?

Accepted Answer

A) $241,200 
B) $97,200 
C) $46,800 
D) $144,000

Question 16

The HF Corporation manufactures and sells toy gyroscopes.The following data is related to sales and production of the toy gyroscopes for last year.

Using absorption costing,what is operating income for last year?

Accepted Answer

A) $749,500 
B) $155,500 
C) $1,200,000 
D) $1,650,500

Question 17

Under absorption costing,all nonmanufacturing costs are treated as period costs.

Accepted Answer

A) True 
 B)False

Question 18

Best Birdies produces ornate birdcages.The company's average cost per unit is $18.00 when it produces 2,200 birdcages.If $5,500 of the costs are fixed,and the plant manager uses the average cost per unit to predict total costs,his forecast for 3,000 birdcages will be

Accepted Answer

A) $52,000. 
B) $39,600. 
C) $14,400. 
D) $54,000.

Question 19

Wallace Incorporated wanted to determine the relationship between its monthly operating costs and a potential cost driver,machine hours.The output of a regression analysis showed the following information (note: only a portion of the regression analysis results is presented here): 
What is the variable cost per machine hour (rounded to the nearest cent)?

Accepted Answer

A) $67.59 
B) $2,945.95 
C) $0.99 
D) $0.72

Question 20

Jean's Fitness Club provides monthly memberships as well as personal training sessions.The personal trainers earn 50% of the revenue for all personal training sessions.The Fitness Club also sells nutrition products.Jean's general ledger accounts indicate the following for the year.The front desk staff wages expense remains the same throughout the year.

If a traditional income statement is prepared for the year,what is operating income?

Accepted Answer

A) $175,500 
B) $280,000 
C) $207,500 
D) $245,500

Exam 6: Cost Behavior

The high-low method basically fits a line through the highest and lowest ________ points.

If inventory has grown,operating income will be higher under absorption costing than it is under variable costing.

Total fixed costs for Randolph Manufacturing are $754,000.Total costs,including both fixed and variable,are $1,000,000 if 150,000 units are produced.The variable cost per unit is

The HF Corporation manufactures and sells toy gyroscopes.The following data is related to sales and production of the toy gyroscopes for last year. Using variable costing,what is the operating income for last year?

In a regression output,the "intercept coefficient" represents the fixed cost component of a mixed cost equation.

During the current period,14,000 units were produced and 12,000 units were sold.Fixed manufacturing costs incurred amounted to $126,000.An absorption costing income statement would report fixed manufacturing costs as which of the following?

Using account analysis,what type of cost is the rental of a space at $6,000 per month?

Which of the following would be considered a discretionary fixed cost?

The income statement is organized by ________ under absorption costing.

The following data pertain to costs at Summit Company: The fixed cost per unit is

The cost of goods sold is a variable cost for merchandise company,but contains a mixture of variable and fixed production costs for manufacturers.

What will happen to the contribution margin if fixed costs related to a product increase while variable costs and sales price remain constant?

The HF Corporation manufactures and sells toy gyroscopes.The following data is related to sales and production of the toy gyroscopes for last year. Using absorption costing,what is operating income for last year?

Under absorption costing,all nonmanufacturing costs are treated as period costs.

Best Birdies produces ornate birdcages.The company's average cost per unit is $18.00 when it produces 2,200 birdcages.If $5,500 of the costs are fixed,and the plant manager uses the average cost per unit to predict total costs,his forecast for 3,000 birdcages will be