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Exam 6: Cost Behaviour: Analysis and Use

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Question 41

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The following information has been provided by the Evans Retail Stores, Inc., for the first quarter of the year: -What is the gross margin of Evans Retail Stores,Inc.,for the first quarter?

A) $140,000.
B) $190,000.
C) $210,000.
D) $220,000.

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Question 42

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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,you would expect which of the following statements to be true?

A) Expense A has remained unchanged.
B) Expense B has decreased.
C) Expense A has decreased.
D) Expense B has increased.

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Question 43

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Comparative income statements for Boggs Sporting Equipment Company for the last two months are presented below: All of the company's costs are either fixed, variable, or a mixture of the two (that is, mixed) . Assume that the relevant range includes all of the activity levels mentioned in this problem. -What is the total monthly fixed cost for Boggs Sporting Equipment Company?

The following data have been provided by a retailer that sells a single product: -What is the best estimate of the company's variable operating expenses per unit?

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,the estimated fixed cost per month for electricity is closest to which of the following?

Prater Company has provided the following data: -What is the best estimate of the company's variable operating expense per unit?

Suppose a firm reports the following results using the least-squares regression method: Y = $750 - $2.56X Y is the daily repair and maintenance cost and X is the daily units of production in hundreds.The daily observations were over a one-month period.The results do not make sense to the manager of the repair and maintenance department. Required: What is the most plausible explanation for the apparently meaningless results?

Which of the following best describes the contribution approach to the income statement?

In the O'Donnell Manufacturing Company, at an activity level of 80,000 machine hours, total overhead costs were $223,000. Of this amount, utilities were $48,000 (all variable) and amortization was $60,000 (all fixed) . The balance of the overhead costs consisted of maintenance cost (mixed) . At 100,000 machine hours, maintenance costs were $130,000. Assume that all of the activity levels mentioned in this problem are within the relevant range. -What is the variable cost for maintenance per machine hour?

Discretionary fixed costs arise from annual decisions by management to spend in certain fixed cost areas.

The following data pertain to activity and utilities costs for two recent years: Using the high-low method,what is the variable cost per unit for utilities?

A mixed cost is partially variable and partially fixed.

Which of the following should be the first step in the analysis of cost behaviour?

An income statement for Crandall's Bookstore for the first quarter of the current year is presented below: On average, a book sells for $50. Variable selling expenses are $5.50 per book, with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales, with the remainder being fixed. -What is the contribution margin for Crandall's Bookstore for the first quarter?

An income statement for Crandall's Bookstore for the first quarter of the current year is presented below: On average, a book sells for $50. Variable selling expenses are $5.50 per book, with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales, with the remainder being fixed. -Using the contribution approach,what is the operating income for the first quarter?

Prater Company has provided the following data: -What is the best estimate of the company's total fixed operating expense per year?

Within the relevant range of activity,how will variable cost per unit behave?

(Appendix 6A)The Stephens Leadership Centre provides training seminars in personal development and time management.The company is relatively new and management is seeking information regarding the Centre's cost structure.The following information has been gathered since the inception of the business in January of the current year: Required: a. Using the high-low method, estimate the variable cost per seminar and the total fixed cost per month. b. Using the least-squares regression method and the equations for a and b, estimate the variable cost per seminar and the total fixed cost per month.

Rymore Company would like to classify the following costs according to their cost behaviour: -Which of the following classifications best describes the behaviour of Cost C?

Given the cost formula Y = $17,500 + $4X,at what level of activity will total cost be $42,500?