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Exam 3: Cost Behaviour

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Question 161

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Crystal Clear Water Hauling wants to determine a fuel surcharge to add to its customers' bills based on the number of miles driven to each area. It wants to separate the fixed and variable portion of the truck's operating costs so it has a better idea of how distance affects these costs. Crystal Clear Water Hauling has the following data available. -Using the high-low method, the monthly operating costs if Crystal Clear Water Hauling drives 18,000 miles in a month will be

A) $29,330
B) $11,330
C) $18,000
D) $36,500

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Question 162

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Xenna Company manufactures coffee tables. The following data is related to sales and production of the tables for last year. -Using absorption costing, what is operating income at Xenna Company for last month?

A) $1,060,200
B) $1,096,200
C) $1,206,000
D) $1,242,000

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Question 163

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Selected financial data for Flash Corporation follows for a production level of 100,000 units: A. Calculate the variable cost per unit. B. If Flash Corporation makes 80,000 units, calculate the fixed cost per unit. C. If Flash Corporation makes 150,000 units, calculate the total variable costs. D. If Flash Corporation makes 200,000 units, calculate the total costs.

Gourmet College has recently opened a restaurant as part of its hospitality major. The manager gathered the following data from the first five weeks of operations. Knowing you are currently taking a managerial accounting course he has asked that you analyze the data. Using the high-low method estimate the weekly cost function for the restaurant costs.

Which of the following would be considered a discretionary fixed cost?

The equation for a straight line is y = vx + f.

The representation for fixed cost per unit of activity is

Within the relevant range, which of the following statements is TRUE with respect to fixed costs per unit?

When managers use their judgment to classify costs as variable, fixed, or mixed, which method are they using?

At any given volume, average fixed costs must equal average variable costs.

In the equation y = vx + f, the x represents the volume of activity.

Total mixed cost graphs slope upward, but do not begin at the origin.

Angry Bird produces decorative birdhouses. The company's average cost per unit is $40.00 at a production level of 2,000 birdhouses. What is the total cost of producing 2,000 birdhouses? -If $10,000 of the costs are fixed, and the plant manager uses the average cost per unit to predict total costs, his forecast for 2,200 birdhouses will be

When preparing a traditional income statement, fixed costs are subtracted from gross margin to arrive at operating income.

Variable costing considers fixed manufacturing costs as inventoriable product costs.

On a traditional income statement, sales revenue less cost of goods sold equals

If the number of units sold exceeds the number of units produced, how is operating income affected?

1. What is a cost equation? 2. If a company has fixed costs of $1,000 and variable costs of $2 per unit, what is their cost equation? 3. What would a company use a cost equation for?

Toby's Farm Store buys portable generators for $500 and sells them for $800. He pays a sales commission of 5% of sales revenue to his sales staff. Toby pays $2,000 a month rent for his store, and also pays $1,800 a month to his staff in addition to the commissions. Toby sold 200 generators in June. -If Toby prepares a traditional income statement for the month of June, what would be his gross profit?

Sunny's Frozen Treats is a snow cone stand near the local park. To plan for the future, Sunny wants to determine his cost behaviour patterns. He has the following information available about his operating costs and the number of snow cones served. -Using the high-low method, the monthly operating costs-if Sunny sells 7,500 snow cones in a month-are