Exam 6: Cost Behavior

Stanley's Bicycles store buys bicycles on average for $600 and sells them on average for $750. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1,400 a month rent for his store, and also pays $3,000 a month to his staff in addition to the commissions. Stanley sold 120 bicycles in June. If Stanley prepares a traditional income statement for the month of June, what would be his operating income?

The tennis club where you play tennis charges $50.00 per month and $10.00 per hour of court time. If your current bill is $100.00, how many hours did you use?

Outliers are data points that fall in the same general pattern as the other data points.

If the number of units produced equals the number of units sold for a manufacturer, both variable costing and absorption costing income statements will yield the same gross margin.

The "averaging method" is a method that may be used to separate mixed costs into fixed and variable components.

A scatter plot will help managers identify potential outliers.

Wallace Industries wanted to determine the relationship between its monthly operating costs and a potential cost driver, machine hours. The output of a regression analysis showed the following information (note: only a portion of the regression analysis results is presented here): What is closest to the total cost if the firm uses 4,200 machine hours?

Variable costs are described by which of the following statements?

Pablo was reviewing the water bill for his carwash business and determined that the highest bill, $5,000, occurred in July when 2,200 cars were washed and the lowest bill, $3,200, occurred in February when 1,400 cars were washed. What was the fixed portion of the water bill?

Doggie Pals produces 100,000 dog collars each month that give off a fresh scent to keep your dog smelling clean between baths. Total manufacturing costs are $200,000. Of this amount, $150,000 are variable costs. What are the total production costs when 125,000 collars are produced? (Assume both production levels are in the same relevant range.)

When graphing total fixed costs, the fixed cost per unit is the slope of the fixed cost line.

The manager at Wheeling Mulch has been trying to calculate the portion of the company's overhead expenses that is fixed and the portion that is variable. Over the past twelve months, the number of yards of mulch processed was highest in July, when the total monthly overhead costs totaled $28,000 for 32,000 yards of mulch processed. The lowest number of yards of mulch processed in the last twelve months occurred in October, when total overhead costs were $26,000 for 28,000 yards of mulch processed. What is the fixed portion of the monthly overhead expenses?

Total variable costs can be expressed as y = vx, where y = total mixed cost, v = mixed cost per unit of activity, and x = volume of activity.

Managers whose bonuses are based on operating income have more incentive to increase inventory levels when variable costing is used than when absorption costing is used.

When the number of units produced is less than the number of units sold, how does operating income under variable costing differ from operating income under absorption costing?

Total fixed costs can be expressed as y = vx, where y = total variable cost, v = variable cost per unit of activity, and x = volume of activity.

If production increases by 25%, how will total fixed costs likely react?

Wallace Incorporated wanted to determine the relationship between its monthly operating costs and a potential cost driver, machine hours. The output of a regression analysis showed the following information (note: only a portion of the regression analysis results is presented here): What is the fixed cost (round to nearest cent)?

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

Mixed costs per unit decrease as volume increases because of the variable cost component.