Question 1

When a manufacturer prepares a contribution margin income statement,Cost of Goods Sold is always a variable cost.

Accepted Answer

A) True 
 B)False

Question 2

Manufacturing overhead is usually what type of cost?

Accepted Answer

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

Question 3

When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis,managers should consider:

Accepted Answer

A) outliers. 
B) general inflation. 
C) seasonality. 
D) all of the above.

Question 4

Under absorption costing,the income statement is organized by:

Accepted Answer

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

Question 5

An equation of a line for total mixed costs is:

Accepted Answer

A) y = vx - f. 
B) y = vx + f. 
C) f = vx -y. 
D) f = vx + y.

Question 6

Toby's Farm Store buys portable generators for $500 and sells them for $800.He pays a sales commission of 5% of sales revenue to his sales staff.Toby pays $2,000 a month rent for his store,and also pays $1,800 a month to his staff in addition to the commissions.Toby sold 200 generators in June.
- If Toby prepares a contribution margin income statement for the month of June,what would be his operating income?

Accepted Answer

A) $48,200 
B) $108,000 
C) $160,000 
D) $56,000

Question 7

The representation for total variable costs is:

Accepted Answer

A) vx. 
B) vx + f. 
C) vx - f. 
D) y = vx.

Question 8

The line determined by regression analysis is sometimes referred to as the "line of best fit".

Accepted Answer

A) True 
 B)False

Question 9

Fresh Best Friends produces 80,000 dog collars each month that give off a fresh scent to keep your dog smelling clean between baths.Total manufacturing costs are $240,000.Of this amount,$180,000 are variable costs.What are the total production costs when 100,000 collars are produced? (Assume both production levels are in the same relevant range.)

Accepted Answer

A) $285,000 
B) $300,000 
C) $465,000 
D) $225,000

Question 10

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.What is the total cost of producing 4,000 anchors?

Accepted Answer

A) $ 80 
B) $4,050 
C) $ 50 
D) $200,000

Question 11

Jeppson Company manufactures computer hard drives.The following data is related to sales and production of the computer hard drives for last year. $\begin{array}{|l|c|}
\hline \text { Selling price per unit } & \$ 100.00 \
\hline \text { Variable manufacturing costs per unit } & \$ 45.00 \
\hline \text { Variable selling and administrative expenses per unit } &\$ 6.00 \
\hline \text { Fixed manufacturing overhead (in total) } & \$ 30,000 \
\hline \text { Fixed selling and administrative expenses (in total) } & \$ 8,000 \
\hline \text { Units produced during year } & 1,500 \
\hline \text { Units sold during year } & 1,200 \
\hline\text { Units in beginning inventory }&0\
\hline
\end{array}$
 
-Using absorption costing,what is operating income for last month?

Accepted Answer

A) $120,000 
B) $ 26,800 
C) $ 57,200 
D) $182,800

Question 12

Crystal Clear Water Hauling wants to determine a fuel surcharge to add to its customers' bills based on the number of miles driven to each area.It wants to separate the fixed and variable portion of the truck's operating costs so it has a better idea of how distance affects these costs.Crystal Clear Water Hauling has the following data available. $$\begin{array} { | l | c | c | } 
\hline \text { Month } & \text { Miles driven } & \text { Total operating costs } \
\hline \text { January } & 15,900 & \$ 27,500 \
\hline \text { February } & 17,300 & \$ 29,910 \
\hline \text { March } & 18,500 & \$ 29,830 \
\hline \text { April } & 16,100 & \$ 28,600 \
\hline \text { May } & 17,100 & \$ 28,800 \
\hline \text { June } & 15,500 & \$ 26,830 \
\hline
\end{array}$$ 
-Using the high-low method,the monthly operating costs if Crystal Clear Water Hauling drives 18,000 miles in a month will be:

Accepted Answer

A) $29,330. 
B) $11,330. 
C) $18,000. 
D) $36,500.

Question 13

Suzy's Cool Treatz is a snow cone stand near the local park.To plan for the future,the owner wants to determine her cost behavior patterns.She has the following information available about her operating costs and the number of snow cones served. $$\begin{array} { | l | c | c | } 
\hline \text { Month } & \text { Number of snow canes } & \text { Total operating costs } \
\hline \text { January } & 3,500 & \$ 5,000 \
\hline \text { February } & 3,800 & \$ 4,800 \
\hline \text { March } & 5,000 & \$ 6,800 \
\hline \text { April } & 3,600 & \$ 5,450 \
\hline \text { May } & 4,700 & \$ 6,200 \
\hline \text { June } & 4,250 & \$ 5,950 \
\hline
\end{array}$$ Suzy uses the high-low method to determine her operating cost equation and sells 4,500 cones for $3.00 each
-What would her operating income be if she prepared a traditional income statement for a month?

Accepted Answer

A) $13,500 
B) $5,400 
C) $8,100 
D) $7,300

Question 14

Using account analysis,what type of cost is the local phone service which charges a flat fee for unlimited local calls?

Accepted Answer

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

Question 15

Total fixed costs for Threads Company are $80,000.Total costs,both fixed and variable,are $170,000 if 125,000 units are produced.The fixed cost per unit at 100,000 units would be:

Accepted Answer

A) $1.70/unit. 
B) $0.90/unit. 
C) $2.50/unit. 
D) $0.80/unit.

Question 16

Toby's Farm Store buys portable generators for $500 and sells them for $800.He pays a sales commission of 5% of sales revenue to his sales staff.Toby pays $2,000 a month rent for his store,and also pays $1,800 a month to his staff in addition to the commissions.Toby sold 200 generators in June.
-If Toby prepares a traditional income statement for the month of June,what would be his gross profit?

Accepted Answer

A) $260,000 
B) $160,000 
C) $60,000 
D) $100,000

Question 17

When using the high-low method,the variable cost per unit can be found as the:

Accepted Answer

A) run over rise. 
B) rise over run. 
C) change in volume over change in cost. 
D) vertical intercept.

Question 18

Fixed costs per unit increase as production levels increase.

Accepted Answer

A) True 
 B)False

Question 19

Total mixed costs increase as volume increases because of the fixed cost component.

Accepted Answer

A) True 
 B)False

Question 20

The following data pertain to costs at Martin Company: $$\begin{array} { | l | c | } 
\hline \text { Total fixed costs } & \$ 250,000 \
\hline \text { Total variable costs } & \$ 80,000 \
\hline \text { Production level } & 40,000 \text { units } \
\hline
\end{array}$$ 
-The fixed cost per unit is:

Accepted Answer

A) $6.25. 
B) $8.25. 
C) $4.25. 
D) $2.00.

Exam 6: Cost Behavior

When a manufacturer prepares a contribution margin income statement,Cost of Goods Sold is always a variable cost.

Manufacturing overhead is usually what type of cost?

When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis,managers should consider:

Under absorption costing,the income statement is organized by:

An equation of a line for total mixed costs is:

The representation for total variable costs is:

The line determined by regression analysis is sometimes referred to as the "line of best fit".

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.What is the total cost of producing 4,000 anchors?

Using account analysis,what type of cost is the local phone service which charges a flat fee for unlimited local calls?

Total fixed costs for Threads Company are $80,000.Total costs,both fixed and variable,are $170,000 if 125,000 units are produced.The fixed cost per unit at 100,000 units would be:

When using the high-low method,the variable cost per unit can be found as the:

Fixed costs per unit increase as production levels increase.

Total mixed costs increase as volume increases because of the fixed cost component.

The following data pertain to costs at Martin Company: $\begin{array} { | l | c | } \hline \text { Total fixed costs } & \$ 250,000 \\\hline \text { Total variable costs } & \$ 80,000 \\\hline \text { Production level } & 40,000 \text { units } \\\hline\end{array}$ -The fixed cost per unit is: