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Exam 3: Cost Behavior: Analysis and Use

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Question 1

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Bakken Corporation has provided the following production and average cost data for two levels of monthly production volume.The company produces a single product. The best estimate of the total variable manufacturing cost per unit is:

A) $16.50
B) $90.40
C) $45.50
D) $106.90

E) None of the above
F) B) and D)

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Question 2

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Eddins Corporation has provided the following production and total cost data for two levels of monthly production volume.The company produces a single product. The best estimate of the total variable manufacturing cost per unit is:

A) $60.10
B) $38.40
C) $21.70
D) $22.30

E) C) and D)
F) A) and D)

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Question 3

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Mateo Company's average cost per unit is $1.425 at the 16,000 unit level of activity and $1.38 at the 20,000 unit level of activity.Assume that all of the activity levels mentioned in this problem are within the relevant range. Required: Predict the following items for Mateo Company: a.Variable cost per unit. b.Total fixed cost per period. c.Total expected costs at the 18,000 unit level of activity.

Krouse Corporation reports that at an activity level of 8,100 units,its total variable cost is $509,652 and its total fixed cost is $197,316.What would be the total cost,both fixed and variable,at an activity level of 8,400 units? Assume that this level of activity is within the relevant range.

Expense A is a fixed cost;expense B is a variable cost.During the current year the activity level has increased,but is still within the relevant range.In terms of cost per unit of activity,we would expect that:

The following data for a production department relate to two accounting periods: The best estimate of the fixed departmental cost is closest to:

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 variable component of inspection cost per unit produced is closest to:

A cost formula may not be valid outside the relevant range of activity.

The planning horizons for committed fixed costs and discretionary fixed costs are generally the same.

The following data pertains to activity and the cost of electricity for two recent months: The best estimate of the total monthly fixed electrical cost is:

Porter Company has provided the following data for the second quarter of the most recent year: Assume that direct labor is a variable cost and that there were no beginning or ending inventories. -The gross margin for Porter Company for the second quarter was:

Gamba 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 $170.00 per unit. The best estimate of the total monthly fixed cost is:

An example of a cost that is variable with respect to the number of units produced and sold is:

Annarummo Inc. ,an escrow agent,has provided the following data concerning its office expenses: Management believes that office expense is a mixed cost that depends on the number of escrows completed.Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction. -Using the high-low method,the estimate of the fixed component of office expense per month is closest to:

The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product: -The best estimate of the total monthly fixed manufacturing cost is:

Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the last five months of operations. -Using the high-low method of analysis,the estimated variable cost per machine hour for electricity is closest to:

The fact that the high-low method uses only two data points is a major defect of the method.

At an activity level of 4,500 machine-hours in a month,Novosel Corporation's total variable maintenance and repair cost is $394,830 and its total fixed maintenance and repair cost is $105,570.What would be the total maintenance and repair cost,both fixed and variable,at an activity level of 4,600 units in a month? Assume that this level of activity is within the relevant range.

Bell Company has provided the following data for maintenance costs: Using the high-low method,the cost formula for maintenance cost would be:

Wigley Inc.has provided the following data concerning its maintenance costs: Management believes that maintenance cost is a mixed cost that depends on machine-hours. Required: Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.Show your work!