Exam 6: Cost Behavior

Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales patterns throughout the year. To plan for the future, Mr. Jones wants to determine its cost behavior patterns. He has the following information available about the ice cream stand's operating costs and the number of soft serve cones served. Using the high-low method, the monthly operating costs-if Mr. Jones sells 1,436 ice cream cones in a month-are

In the equation y = $7.20x + $790, "y" represents

Tasty Treats is a snow cone stand near the local park. To plan for the future, Tasty Treats wants to determine its cost behavior patterns. It has the following information available about its operating costs and the number of snow cones served. The variable cost per snow cone using the high-low method is

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

Maintenance costs at Wilmington Manufacturing over the past six months are listed in the following table. Using the high-low method, what would the total maintenance costs be if 17,500 machine hours were used?

Total mixed cost graphs intersect the y-axis at the level of fixed costs.

Joe, Jeff and Jerry Frank own Frank Brothers Farm, a seed company specializing in seed corn. At their weekly meeting they tried to calculate the portion of the farm's overhead expenses that is fixed and the portion that is variable. Over the past twelve months, the number of bushels of seed corn that has been sold reached its peak in May, when the total monthly overhead costs totaled $250,000 for 95,000 bushels of seed corn sold. The lowest number of bushels sold in the last twelve months occurred in December, when total overhead costs were $75,000 for 7,500 bushels sold. What was the variable cost per yard?

The high-low method uses only two of the historical data points for estimating a cost equation.

Schrute Farm Sales buys portable generators for $450 and sells them for $720. He pays a sales commission of 5% of sales revenue to his sales staff. Mr. Schrute pays $2,000 a month rent for his store, and also pays $1,700 a month to his staff in addition to the commissions. Mr. Schrute sold 200 generators in June. If Mr. Schrute prepares a contribution margin income statement for the month of June, what would be his operating income?

Cost behavior can be mathematically expressed using equations.

Total fixed costs for Taylor Incorporated are $240,000. Total costs, including both fixed and variable, are $500,000 if 125,000 units are produced. The variable cost per unit is

Relevant range is the range of activity (volume)over which total fixed costs and variable costs per unit can be assumed to remain the same.

Frost Company has a contribution margin per unit of $49. If 7,000 more items are sold, and fixed expenses remain the same, the net change in operating income will be

An R-square value of 0.00 indicates a perfect relationship between the volume of activity and the cost being analyzed.

GreatCalls has a special plan offer this month. There is a $3.00 per month charge each month and calls anywhere in the United States are $0.04 per minute. What would the monthly cost be if you typically talk for 450 minutes per month?

Mixed costs are purely fixed.

The controller for Andy's Bicycles has gathered the following cost and activity level information: a. What is the total cost of producing 1,000 racing bicycles? b. What is the variable cost of producing each racing bicycle? c. Suppose the controller uses the average cost to predict total costs. What total cost would the controller calculate for 2,500 racing bicycles? d. If the controller uses the cost equation to predict total costs, what total cost would the controller calculate for 2,500 racing bicycles? e. Is there a difference between the forecasted total cost using average cost versus the cost equation? If there is a difference, what creates the difference? If there is no difference, when would there be a difference?

The line determined by regression analysis is sometimes referred to as the "line of worst fit."

An R-square statistic of 0 indicates a perfect level of correlation between costs and the cost driver.

During the current period, 14,000 units were produced and 12,000 units were sold. Fixed manufacturing costs incurred amounted to $126,000. An absorption costing income statement would report fixed manufacturing costs as which of the following?