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Exam 22: Analyzing Mixed Costs

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Question 1

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Maintenance costs at a Straiton Corporation factory are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first and round off to the nearest whole cent.Compute the fixed component second and round off to the nearest whole dollar.These estimates would be closest to:

A) $0.10 per machine-hour; $54,382 per month
B) $15.00 per machine-hour; $54,316 per month
C) $9.12 per machine-hour; $21,309 per month
D) $9.53 per machine-hour; $19,801 per month

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

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Question 2

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In a scattergraph of cost and activity,activity is the independent variable because it causes variations in the cost.

A) True
B) False

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Question 3

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The least-squares regression method computes the regression line that minimizes the sum of the squared deviations from the plotted points to the line.

(Appendix 5A) The Blaine Corporation is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead costs equal $240,000. Of this amount, depreciation totals $80,000 (all fixed) and lubrication totals $72,000 (all variable) . The remaining $88,000 of the total overhead cost consists of utility cost (mixed) . At an activity level of 9,000 setups, utility cost totals $112,000. Assume that the relevant range includes all of the activity levels mentioned in this problem. -The total fixed overhead costs for Blaine Corporation are most likely closest to:

(Appendix 5A) Wilson Corporation's activity for the first six of the current year is as follows: -Using the high-low method,the fixed portion of the electrical cost each month would be:

The following data pertains to activity and maintenance cost for two recent periods: Maintenance cost is a mixed cost with both fixed and variable components.Using the high-low method,the cost formula for maintenance cost is:

The management of Hamano Corporation would like for you to analyze their repair costs,which are listed below: Management believes that repair cost is a mixed cost that depends on the number of machine-hours.Using the least-squares regression method,the estimates of the variable and fixed components of repair cost would be closest to:

Below are cost and activity data for a particular cost over the last four periods.Your boss has asked you to analyze this cost so that management will have a better understanding of how this cost changes in response to changes in activity. Required: Using the least-squares regression method,estimate the cost formula for this cost.

(Appendix 5A) Callander 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 $140.50 per unit. -The best estimate of the total variable cost per unit is:

(Appendix 5A) Babuca 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:

Electrical costs at one of Finfrock Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first,rounding off to the nearest whole cent.Then compute the fixed component,rounding off to the nearest whole dollar.Those estimates are closest to:

(Appendix 5A) Babuca 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 monthly fixed manufacturing cost is:

(Appendix 5A) Hiss Corporation's activity for the last six months is as follows: -Using the high-low method of analysis,the estimated variable lubrication cost per machine hour is closest to:

Bakan 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:

(Appendix 5A) Compton Corporation is a wholesale distributor of educational CD-ROMs. The company's records indicate the following: -Using the high-low method of analysis,what are the company's estimated variable selling and administrative expenses per unit?

The management of Rutledge Corporation would like to better understand the behavior of the company's warranty costs.Those costs are listed below for a number of recent months: Management believes that warranty cost is a mixed cost that depends on the number of product returns. Required: Estimate the variable cost per product return and the fixed cost per month using the least-squares regression method.

(Appendix 5A) Compton Corporation is a wholesale distributor of educational CD-ROMs. The company's records indicate the following: -What is the company's contribution margin for this year?

(Appendix 5A) Wilson Corporation's activity for the first six of the current year is as follows: -Using the high-low method,the variable cost per machine hour would be:

(Appendix 5A) Hiss Corporation's activity for the last six months is as follows: -Using the least-squares regression method of analysis,the estimated monthly fixed component of lubrication cost is closest to:

A quick look at a scattergraph of cost versus activity can reveal that there is little relation between the cost and the activity or that the relation is something other than a simple straight line.In such cases,least square regression is highly recommended for estimating fixed and variable costs.