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Exam 17: Cost-Volume-Profit Relationships

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Question 1

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In describing the cost formula equation, Y = a + bX, which of the following is correct:

A) "Y" is the independent variable.
B) "a" is the variable cost per unit.
C) "a" and "b" are valid for all levels of activity.
D) in the high-low method, "b" equals the change in cost divided by the change in activity.

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

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Question 2

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Utility costs at one of Hannemann Corporation's factories are listed below: Management believes that utility cost is a mixed cost that depends on machine-hours. Required: Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.Show your work!

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11ea7998_5e41_9e6d_911b_fd67b2ee8f2a_TB2627_00_TB2627_00 Variable cost = Change in cost ÷ Change in activity Variable cost = $547 ÷ 66 machine-hours = $8.29 per machine-hour Fixed cost = Total cost - Variable cost Fixed cost = $52,824 − ($8.29 per machine-hour × 5,021 machine-hours)= $11,200

Question 3

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The management of Dethlefsen Corporation would like to have a better understanding of the behavior of its inspection costs.The company has provided the following data: Management believes that inspection cost is a mixed cost that depends on direct labor-hours. Required: Estimate the variable cost per direct labor-hour and the fixed cost per month using the high-low method.Show your work!

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:

Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to:

Using the least-squares regression method of analysis, the estimated monthly fixed component of lubrication cost is closest to:

Using the high-low method, the estimate of the fixed component of office expense per month is closest to:

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:

What would be the competitor's prediction of total fixed cost per period?

The total fixed overhead costs for Blaine Corporation are most likely closest to:

Using the high-low method of analysis, what are the company's estimated total fixed selling and administrative expenses per year?

Least-squares regression selects the values for the intercept and slope of a straight line that minimize the sum of the errors.

Swofford Inc.has provided the following data concerning its maintenance costs: Management believes that maintenance cost is a mixed cost that depends on machine-hours. Required: Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.Show your work!

Furlan Printing Corp., a book printer, has provided the following data: Management believes that the press setup cost is a mixed cost that depends on the number of titles printed.(A specific book that is to be printed is called a "title".Typically, thousands of copies will be printed of each title.Specific steps must be taken to setup the presses for printing each title-for example, changing the printing plates.The costs of these steps are the press setup costs.) Required: Estimate the variable cost per title printed and the fixed cost per month using the least-squares regression method.

Using the high-low method, the variable cost per machine hour would be:

Arlo's T-shirt Shop only has three costs: T-shirt cost, rent cost on the shop, and utilities cost.Arlo's sells the T-shirts for $14.50 each.Management has prepared the following cost information for next month: Assume that all of the activity levels mentioned in this problem are within the relevant range. Required: a.Calculate Arlo's total variable cost if 9,000 T-shirts are sold next month. b.Prepare Arlo's contribution format income statement if 10,000 T-shirts are sold.

The best estimate of the total contribution margin when 6,300 units are sold is:

What would be the competitor's prediction of variable cost per unit for Matthew Corporation?

Using the least-squares regression method, the estimate of the variable component of inspection cost per unit produced is closest to:

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: