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Exam 6: Cost Behavior

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Question 61

Multiple Choice

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The managerial accountant at Organic Beverage Factory used spreadsheet software to run a regression analysis scenario and compile the following monthly cost data: Which of the following is the correct cost equation showing the correlation of monthly costs, based on the results of the regression analysis compiled by the managerial accountant?

A) y = $4,286,652 + $28.21
B) y = 0.6521x + $4,286,652
C) y = $0.6521 + $28.21x
D) y = $28.21x + $4,286,652

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Question 62

Multiple Choice

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Joe, Jeff and Jerry Frank own Frank Brothers Farm, a seed company specializing in seed corn. At their weekly meeting they tried to calculate the portion of the farm's overhead expenses that is fixed and the portion that is variable. Over the past twelve months, the number of bushels of seed corn that has been sold reached its peak in May, when the total monthly overhead costs totaled $290,000 for 90,000 bushels of seed corn sold. The lowest number of bushels sold in the last twelve months occurred in December, when total overhead costs were $70,000 for 10,000 bushels sold. What is the fixed portion of the monthly overhead expenses?

A) $42,500
B) $262,500
C) $247,500
D) $70,000

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Question 63

True/False

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A "perfect" straight line would render an R-square value of 1.00.

Stanley's Bicycles store buys bicycles on average for $650 and sells them on average for $770. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1400 a month rent for his store, and also pays $4000 a month to his staff in addition to the commissions. Stanley sold 150 bicycles in June. If Stanley prepares a contribution margin income statement for the month of June, what would be his contribution margin?

What factor related to manufacturing costs causes the difference between operating income computed using absorption costing and operating income computed using variable costing?

At Dwight Incorporated, total fixed and variable costs are $420,000 at a production level of 130,000 units. The company has total fixed costs of $225,000. The variable cost per unit at 200,000 units is

Which step is performed first when using the high-low method?

Which of the following is a characteristic of a variable cost?

On a regression analysis output generated with Excel, a regression equation's variable cost per unit is represented by the

If the number of units produced equals the number of units sold for a manufacturer, both variable costing and absorption costing income statements will yield the same gross margin.

Runaround Corporation sells running shoes and during January they ran production machines for 20,000 hours total and incurred $9,000 in maintenance costs. During July they ran production machines for 14,000 hours total and incurred $7,200 in maintenance costs. Based on this data, what is the variable maintenance cost per machine hour?

Total fixed costs for Randolph Manufacturing are $754,000. Total costs, including both fixed and variable, are $5,000,000 if 160,000 units are produced. The variable cost per unit is

The cost equation determined using the high-low method should be the same as the cost equation determined using regression analysis.

The Akron Slugger Company produces various types of wooden baseball bats. It has calculated the average cost per unit of a production level of 7500 bats to be $11. If $22,900 of the total costs are fixed, what is the variable cost of producing each bat?

For most businesses, annual straight line depreciation expense on the company's building is what type of cost?

Valle Crucis Corporation 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 closest to the total cost if the firm uses 6,000 machine hours?

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

The following is information about the units produced and the total manufacturing costs for Rose's Rug Company for the past six months. Rose's Rug Company uses the high-low method to estimate its costs. Answer the following questions: a. What is the variable cost per unit? b. What is the monthly fixed manufacturing cost? c. Write the cost equation that could be used to predict Rose's Rug Company's total manufacturing costs. d. What will the total monthly manufacturing costs be if the company produces 28,000 units?

Best Birdies produces ornate birdcages. The company's average cost per unit is $22 when it produces 2700 birdcages. If $5700 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 3500 birdcages will be

Valle Crucis Corporation 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 fixed cost (round to nearest cent) ?