Exam 6: Cost Behaviour: Analysis and Use

The "goodness of fit" statistic (that is,R-squared)associated with the least-squares regression method indicates the proportion of a mixed cost that is variable.

The contribution approach to the income statement classifies costs by behaviour rather than by function.

Which of the following concepts used in estimating cost behaviour is unique to the least-squares regression method?

Stuart Manufacturing produces metal picture frames.The company's income statements for the last two years are presented below: The company has no beginning or ending inventories. Required: a. Estimate the company's total variable cost per unit, and its total fixed costs per year. (Remember that this is a manufacturing firm.) b. Compute the company's contribution margin for this year.

In describing the cost formula equation Y = a + bX,which of the following statements is correct?

The following data pertain to activity and costs for two months: Assuming that these activity levels are within the relevant range,what were the mixed costs for November?

At an activity level of 10,000 units,total variable costs were $35,000 while total fixed costs were $20,800.If 16,000 units are produced and this activity is within the relevant range,which of the following statements is correct?

At an activity level of 6,000 units,the cost for maintenance is $7,200; at 10,000 units,the cost for maintenance is $11,600.Using the high-low method,what is the cost formula for maintenance?

Rymore Company would like to classify the following costs according to their cost behaviour: -Which of the following classifications best describes the behaviour of Cost A?

The following information summarizes the company's cost structure: Assume that all of the activity levels mentioned in this problem are within the relevant range. Required: Prepare a schedule showing predictions for the following items at the 40,000 unit level of activity: a) Total variable cost. b) Total fixed cost. c) Variable cost per unit. d) Fixed cost per unit.

Sorter Company has provided the following data for the third quarter of the most recent year: Assume that direct labour is a variable cost and that there was no beginning or ending inventories -At the level of sales for the third quarter,how much in additional fixed selling expenses could Sorter Company have afforded to spend and still would have reported $41,500 operating income?

In the O'Donnell Manufacturing Company, at an activity level of 80,000 machine hours, total overhead costs were $223,000. Of this amount, utilities were $48,000 (all variable) and amortization was $60,000 (all fixed). The balance of the overhead costs consisted of maintenance cost (mixed). At 100,000 machine hours, maintenance costs were $130,000. Assume that all of the activity levels mentioned in this problem are within the relevant range. -What is the total fixed overhead cost for O'Donnell?

Selected information about Buehler Corporation's operations at high and at low levels of activity follow: Using the high-low method,what is the total variable cost per unit of product?

Gasson Company is a merchandising firm. Next month, the company expects to sell 800 units. The following data describe the company's revenue and cost structure: Assume that all activity mentioned in this problem is within the relevant range. -What is the expected contribution margin next month?

In order for a cost to be variable,it must vary with either units produced or units sold.

(Appendix 6A)The Accounting Department of Archer Company,a merchandising company,has prepared the following analysis: The Accounting Department feels that billing expense is a mixed cost, containing both fixed and variable cost elements. A tabulation has been made of billing expense and sales in units over the last several months, as follows: The Accounting Department now plans to develop a cost formula for billing expense so that a contribution-type income statement can be prepared for management's use. Required: a. Using the least-squares regression method and the equations for a and b, estimate the cost formula for billing expense. b. Assume that the company plans to sell 30,000 units during July at a selling price of $100 per unit. Prepare a budgeted income statement for the month, using the contribution format.

The controller of Joy Co has requested a quick estimate of the manufacturing supplies needed for July when production is expected to be 470,000 units.Below are actual data from the prior three months of operations: Using these data and the high-low method,what is the best estimate of the cost of manufacturing supplies that would be needed for July? (Assume that this activity is within the relevant range.)

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

(Appendix 6A)Below are cost and activity data for a particular cost over the last four periods.Your boss has asked you to analyze this cost so that management will have a better understanding of how this cost changes in response to changes in activity.

The linear equation Y = a + bX is often used to express cost formulas.Which of the following representations in this equation is correct?