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Exam 5: Cost Behavior Analysis and Use

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Question 61

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At an activity level of 2,400 units, Kloster Corporation's total variable cost is $118,008 and its total fixed cost is $9,000. Required: For the activity level of 2,500 units, compute: (a) the total variable cost; (b) the total fixed cost; (c) the total cost; (d) the average variable cost per unit; (e) the average fixed cost per unit; and (f) the average total cost per unit. Assume that this activity level is within the relevant range.

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Question 62

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Annarummo 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:

A) $12,724
B) $11,333
C) $9,521
D) $14,115

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Question 63

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Stewart Company is attempting to classify costs according to their cost behavior. Data concerning activity and costs are listed below: -The costs that Stewart Company would classify as variable would be:

When the level of activity increases within the relevant range, how does each of the following change?

Inspection costs at one of Pulley Corporation's factories are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. -Using the high-low method, the estimate of the variable component of inspection cost per unit produced is closest to:

The relevant range concept is not applicable to mixed costs.

Carbert 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 4,300 units is closest to:

Fixed cost per unit increases as activity decreases and decreases as activity increases.

Buffo Company fabricates metal folding chairs. Data concerning the company's revenue and cost structure follow: -If Buffo expects to produce and sell 2,000 units next month, the total expected manufacturing cost would be:

The planning horizons for committed fixed costs and discretionary fixed costs are generally the same.

Which costs will change with a decrease in activity within the relevant range?

In October, Haldeman Corporation, a manufacturing company, reported the following financial data: The company had no beginning or ending inventories. -The contribution margin for October was:

Bellido Inc., a manufacturing company, has provided the following data for December: Required: Prepare an income statement in good form for December using the contribution approach.

Buffo Company fabricates metal folding chairs. Data concerning the company's revenue and cost structure follow: -If Buffo plans to produce and sell 4,000 units next month, the expected gross margin would be:

Sibrel Inc., a manufacturing company, has provided the following financial data for September: The company had no beginning or ending inventories. Required: a. Prepare an income statement in good form for September using the traditional approach. b. Prepare an income statement in good form for September using the contribution approach.

The Central Valley Company is a merchandising firm that sells a single product. The company's revenues and expenses for the last three months are given below: Required: a. Determine which expenses are mixed and, by use of the high-low method, separate each mixed expense into its variable and fixed components. State the cost formula for each mixed expense. b. Compute the company's total contribution margin for May.

A cost driver is:

Wigley 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!

The linear equation Y = a + bX is often used to express cost formulas. In this equation: