1)You are applying the scattergraph method and find that the regression line you have drawn passes through a data point with the following coordinates: 7,500 units and $10,000. The regression line passes through the Y axis at the $4,000 point. Which of the following is the cost formula that represents the slope of this line?a. Y=$4,000+$1.25Xb. Y=$4,000+$0.80Xc. Y=$10,000+$1.33Xd. None of the above is true

2) Contribution margin is computed as sales revenue minus:a. fixed expenses b. variable expenses c. cost of goods sold d. cost of goods manufactured

3) A consulting company would like to develop a method of predicting its total costs in a period. The following past costs have been recorded by the company in two periods:Number of client hours= 420    515Total cost=$82,200   $90,275

The best estimate of the cost formula for the company (where X is the number of client-hours) is:

a. Y = $46,500 + $85 Xb. Y = $42,000 + $95 Xc. Y = $46,500 – $85 Xd. Y = $51,500 – $95 X

4) Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The following data describe the company's revenue and cost structure:Selling price per unit=$40Sales commission= 5%Purchase price(cost) per unit=$18Advertising expense=$4,000 per monthAdministrative expense=$4,500 per month plus 15% of sales

Assume that all activity mentioned in this problem is within the relevant range.

The expected total administrative expense next month is:

$9,300

5) At an activity level of 8,400 machine-hours in a month, Braughton Corporation's total variable maintenance and repair cost is $697,284 and its total fixed maintenance and repair cost is $464,100. What would be the total maintenance and repair cost, both fixed and variable, at an activity level of 8,500 units in a month? Assume that this level of activity is within the relevant range.$1,169,685

6) Which of the following statements is true when referring to the high-low method of cost analysis?a. The high-low method has no major weaknesses.b. The high-low method is very hard to apply.c. In essence, the high-low method draws a straight line through two data points.d. None of the above is true.

7) Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The following data describe the company's revenue and cost structure:Selling price per unit=$40Sales commission= 5%Purchase price(cost) per unit=$18Advertising expense=$4,000 per monthAdministrative expense=$4,500 per month plus 15% of sales

Assume that all activity mentioned in this problem is within the relevant range.

The expected net operating income next month is:

$2,700

8) 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:Production volume= 2,000 units   5,000 unitsDirect materials= $75.70 per unit $75.70 per unitDirect labor= $28.40 per unit $28.40 per unitManufacturing overhead= $113.60 per unit $58.10 per unit

The best estimate of the total monthly fixed manufacturing cost is:

$185,000

9) Callaghan 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 $138.20 per unit.

Sales volume (units)= 6,000   7,000Cost of sales= $449,200 $582,400Selling and administrative costs= $285,600 $303,800

The best estimate of the total monthly fixed cost is:

$176,400

10) Iacono 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 $127.20 per unit.

Sales volume (units)= 5,000   6,000Cost of sales= $419,000 $502,800Selling and administrative costs= $186,500   $202,200

The best estimate of the total contribution margin when 5,300 units are sold is:

$146,810

11) 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 depreciation was $60,000 (all fixed). The balance of the overhead cost 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.

The total fixed overhead cost for O'Donnell is:

$115,000

12) Glory Company's gross margin exceeded its contribution margin by $25,000. If sales totaled $175,000 when net operating income equaled $20,000 and total selling and administrative expenses equaled $55,000, then the contribution margin equaled:

$50,000

13) Shown below are units produced and total manufacturing costs for the past four months at Minga Manufacturing Corporation:    Units produced      Total costJul        120             $446,000Aug     150              $508,000Sep      180              $668,000Oct      160              $574,000

What is Minga's cost formula for total manufacturing cost under the high-low method?a. Y = $2,000 + $3,700Xb. Y = $3,700 + $2,000Xc. Y = $14,000 + $3,600Xd. Y = $62,000 + $3,200X

14) Which costs will change with an increase in activity within the relevant range?

a. Unit fixed cost and total fixed costb. Unit variable cost and total variable costc. Unit fixed cost and total variable costd. Unit fixed cost and unit variable cost

15) Vicuna Wool Company manufactures and sells sweaters. Last year, Vicuna operated at 100% of capacity and had the following cost formula for total manufacturing costs:

Y = $50,000 + $400X

Assuming no change in cost structure, what would Vicuna's cost formula have been last year if they only operated at 90% of production capacity?a. Y = $45,000 + $360Xb. Y = $45,000 + $400Xc. Y = $50,000 + $360Xd. Y = $50,000 + $400X

16) For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a:a) fixed cost b) mixed cost c) step-variable cost d) variable cost

17) Jackson, Inc., is preparing a budget for next year and requires a breakdown of the cost of steam used in its factory into fixed and variable components. The following data on the cost of steam used and direct labor hours worked are available for the last six months:        Cost of Steam   Direct labor hourJuly        $15,580       3,000August       13,400      2,050September 16,370      2,900October      19,800      3,650November 17,600      2,670December   18,500      2,650Total           101,520    19,920

If Jackson uses the high-low method of analysis, the estimated variable cost of steam per direct labor hour would be:

$4.00

18) The following production and average cost data for a month's operations have been supplied by a company that produces a single product.Production volume= 1,000 units      2,000 unitsDirect materials=$4.00 per unit    $4.00 per unitDirect labor=$3.50 per unit     $3.50 per unitManufacturing overhead=$10.00 per unit   $6.20 per unit

The total fixed manufacturing cost and variable manufacturing cost per unit are as follows:a. $3,600; $7.50b. $3,600; $9.90c. $7,600; $7.50d. $7,600; $9.90

19) A jewelry manufacturer incurred the following costs: 15,000 units produced with costs of $557,500, and 5,000 units produced with costs of $292,500. Which cost formula would you estimate using the high-low method?a. Y=$265,000+$37.17Xb. Y=$160,000+$17.67Xc. Y=$265,000+$58.50Xd. Y=$160,000+$26.50X

20) Oerther Corporation reports that at an activity level of 5,000 units, its total variable cost is $131,750 and its total fixed cost is $31,200.

What would be the average fixed cost per unit at an activity level of 5,200 units? Assume that this level of activity is within the relevant range

$6.00

21) Larson Brothers, Inc., used the high-low method to derive its cost formula for electrical power cost. According to the cost formula, the variable cost per unit of activity is $3 per machine-hour. Total electrical power cost at the high level of activity was $7,600 and at the low level of activity was $7,300. If the high level of activity was 1,200 machine hours, then the low level of activity was:

1,100 machine hours

22) Comparative income statements for Boggs Sports Equipment Company for the last two months are presented below:                             July        AugustSales units.....    11,000      10,000Sales……..      $165,000 $150,000Cost of goods sold 72,600   66,000Gross margin    92,400        84,000Selling and administrative expense:Rent……….      12,000        12,000Sales commission13,200      12,000Maintenance expense 13,500   13,000Clerical expense      16,000    15,000Total selling and administrative expense 54,700 52,000Net operating income   $37,700 $ 32,000All of the company's costs are either fixed, variable, or a mixture of the two (i.e., mixed).

Assume that the relevant range includes all of the activity levels mentioned in this problem

If sales are projected to be 8,000 units in September, total expected selling and administrative expenses would be:

$46,600

23) Gasson Company is a merchandising firm. Next month the company expects to sell 800 units. The following data describe the company's revenue and cost structure:

Seling price per unit=$40Sales commission=5%Purchase price (cost) per unit=$18Advertising expense=$4,000 per monthAdministrative expense=$4,500 per month plus 15% of sale

Assume that all activity mentioned in this problem is within the relevant range.

The expected contribution margin next month is:

$11,200

24) At an activity level of 9,000 machine-hours in a month, Moffatt Corporation's total variable maintenance cost is $390,240 and its total fixed maintenance cost is $368,280.

What would be the total variable maintenance cost at an activity level of 9,300 machine-hours in a month? Assume that this level of activity is within the relevant range.

$403,248

25) Schuler Inc. reports that at an activity level of 2,100 machine-hours in a month, its total variable inspection cost is $69,846 and its total fixed inspection cost is $9,072.

What would be the average fixed inspection cost per unit at an activity level of 2,400 units in a month? Assume that this level of activity is within the relevant range.

$3.78