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Exam 5: Cost Behavior Analysis and Use

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Question 21

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The management of Degenhart Corporation, a manufacturing company, has provided the following data for February: The contribution margin for February was:

A) $34,000
B) $323,000
C) $191,000
D) $310,000

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

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Question 22

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Maxwell Company has a total expense per unit of $2.00 per unit at the 16,000 level of activity and total expense per unit of $1.95 at the 21,000 unit level of activity. -The best estimate of the variable cost per unit for Maxwell Company is:

A) $0.56
B) $1.79
C) $2.00
D) $1.95

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

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Question 23

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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 variable component of office expense per escrow completed is closest to:

Buffo Company fabricates metal folding chairs. Data concerning the company's revenue and cost structure follow: -If Buffo expects to produce and sell 5,000 units next month, the expected net operating income would be:

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 mixed would be:

The management of Fagundes 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!

Porter Company has provided the following data for the second quarter of the most recent year: Assume that direct labor is a variable cost and that there were no beginning or ending inventories. -The gross margin for Porter Company for the second quarter was:

The cost of goods sold in a retail store totaled $325,000. Fixed selling and administrative expenses totaled $115,000 and variable selling and administrative expenses were $210,000. If the store's contribution margin totaled $590,000, then sales must have been:

Baaca 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 cost to manufacture 6,300 units is closest to:

Grundmann Inc. reports that at an activity level of 6,500 machine-hours in a month, its total variable inspection cost is $487,110 and its total fixed inspection cost is $326,040. -What would be the average fixed inspection cost per unit at an activity level of 6,600 units in a month? Assume that this level of activity is within the relevant range.

Bacho Corporation reports that at an activity level of 5,400 units, its total variable cost is $416,934 and its total fixed cost is $142,560. -What would be the average fixed cost per unit at an activity level of 5,500 units? Assume that this level of activity is within the relevant range.

Bakken 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:

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

Bell Company has provided the following data for maintenance costs: Using the high-low method, the cost formula for maintenance cost would be:

Anderton 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 monthly fixed manufacturing cost is:

Electrical costs at one of Gotch 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 to estimate the variable and fixed components of this cost, these estimates would be closest to:

The following data for a production department relate to two accounting periods: The best estimate of the fixed departmental cost is closest to:

In August, Clarey Corporation, a manufacturing company, reported the following financial data: The company had no beginning or ending inventories. Required: a. Prepare an income statement in good form for August using the traditional approach. b. Prepare an income statement in good form for August using the contribution approach.

Shipping expense is $9,000 for 8,000 pounds shipped and $11,250 for 11,000 pounds shipped. Assuming that this activity is within the relevant range, if the company ships 9,000 pounds, its expected shipping expense is closest to:

Prater Company has provided the following data: -The best estimate of the company's variable selling and administrative expense per unit is: