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Exam 22: Analyzing Mixed Costs

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Question 41

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

A) Y = $1.65 X
B) Y = $1.75 X
C) Y = $3,750 + $1.75 X
D) Y = $6,000 + $1.25 X

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

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Question 42

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(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. -If 7,800 setups are projected for the next period,total expected overhead cost would be closest to:

A) $156,000
B) $236,000
C) $214,400
D) $276,000

E) B) and D)
F) A) and B)

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Question 43

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Larker 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 $4 per machine-hour.Total electrical power cost at the high level of activity was $19,200 and at the low level of activity was $18,400.If the high level of activity was 3,300 machine hours,then the low level of activity was:

(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 variable cost per setup for utilities is most likely closest to:

(Appendix 5A) Recent maintenance costs of Divers Corporation are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours. -Using the least-squares regression method,the estimate of the fixed component of maintenance cost per month is closest to:

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

Iacob 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 $103.40 per unit. The best estimate of the total contribution margin when 5,300 units are sold is:

(Appendix 5A) Lacourse Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. -Using the least-squares regression method,the estimate of the fixed component of inspection cost per month is closest to:

Dacosta 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:

Supply costs at Coulthard Corporation's chain of gyms are listed below: Management believes that supply cost is a mixed cost that depends on client-visits.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) Wuensch 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:

Seifer Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on the number of units produced.Using the least-squares regression method,the estimates of the variable and fixed components of inspection cost would be closest to:

Butler Sales Company is a distributor that has an exclusive franchise to sell a particular product made by another company.Butler Sales Company's traditional format income statements for the last two years are given below: Selling and administrative expense is a mixture of fixed costs and variable costs that vary with respect to the number of units sold. Required: a.Estimate the company's variable selling and administration expense per unit,and its total fixed selling and administrative expense per year. b.Compute the company's contribution margin for this year.

(Appendix 5A) One of Matthew Corporation's competitors has learned that Matthew has a total expense per unit of $1.50 at the 15,000 unit level of activity and total expense per unit of $1.45 at the 20,000 unit level of activity. Assume that the relevant range includes all of the activity levels mentioned in this problem. -What would be the competitor's prediction of total fixed cost per period?

(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 contribution margin when 6,300 units are sold is:

The highest and lowest costs are always used to analyze a mixed cost under the high-low method.

(Appendix 5A) Electrical costs at one of Rome Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours. -Using the high-low method,the estimate of the variable component of electrical cost per machine-hour is closest to:

Which of the following statements is true when referring to the high-low method of cost analysis?

Caraco 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 cost to manufacture 7,300 units is closest to:

(Appendix 5A) Lacourse Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. -Using the least-squares regression method,the estimate of the variable component of inspection cost per unit produced is closest to: