Exam 17: Cost-Volume-Profit Relationships

Supply costs at Coulthard Corporation's chain of gyms are listed below: Management believes that supply cost is a mixed cost that depends on client-visits.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first, rounding off to the nearest whole cent.Then compute the fixed component, rounding off to the nearest whole dollar.Those estimates are closest to:

Iacob Corporation is a wholesaler that sells a single product.Management has provided the following cost data for two levels of monthly sales volume.The company sells the product for $103.40 per unit. The best estimate of the total contribution margin when 5,300 units are sold is:

Using the high-low method, the estimate of the variable component of electrical cost per machine-hour is closest to:

If Casablanca expects to incur 185,000 machine hours next month, what will the estimated total overhead cost be using the high-low method?

A quick look at a scattergraph of cost versus activity can reveal that there is little relation between the cost and the activity or that the relation is something other than a simple straight line.In such cases, least square regression is highly recommended for estimating fixed and variable costs.

Using the least-squares regression method, the estimate of the fixed component of inspection cost per month is closest to:

Butler Sales Company is a distributor that has an exclusive franchise to sell a particular product made by another company.Butler Sales Company's traditional format income statements for the last two years are given below: Selling and administrative expense is a mixture of fixed costs and variable costs that vary with respect to the number of units sold. Required: a.Estimate the company's variable selling and administration expense per unit, and its total fixed selling and administrative expense per year. b.Compute the company's contribution margin for this year.

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.The billing expenses and sales in units over the last several months follow: The accounting department now plans to develop a cost formula for billing expense so that a contribution format income statement can be prepared for management's use. Required: a.Using the least-squares method, estimate the cost formula for billing expense.Round off both the fixed cost and the variable cost per thousand units sold to the nearest whole dollar. 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.

Using the high-low method, the estimate of the variable component of office expense per escrow completed is closest to:

Using the high-low method, the fixed portion of the electrical cost each month would be:

What is the company's contribution margin for this year?

The best estimate of the total monthly fixed manufacturing cost is:

Edal 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 variable manufacturing cost per unit is:

The high and low points used in the high-low method tend to be unusual and therefore the cost formula for the mixed cost may not accurately represent all of the data.

Larker Brothers, Inc., used the high-low method to derive its cost formula for electrical power cost.According to the cost formula, the variable cost per unit of activity is $4 per machine-hour.Total electrical power cost at the high level of activity was $19,200 and at the low level of activity was $18,400.If the high level of activity was 3,300 machine hours, then the low level of activity was:

Electrical costs at one of Finfrock Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first, rounding off to the nearest whole cent.Then compute the fixed component, rounding off to the nearest whole dollar.Those estimates are closest to:

The management of Rutledge Corporation would like to better understand the behavior of the company's warranty costs.Those costs are listed below for a number of recent months: Management believes that warranty cost is a mixed cost that depends on the number of product returns. Required: Estimate the variable cost per product return and the fixed cost per month using the least-squares regression method.

The best estimate of the total cost to manufacture 5,300 units is closest to:

Seifer Inc.'s inspection costs are listed below: Management believes that inspection cost is a mixed cost that depends on the number of units produced.Using the least-squares regression method, the estimates of the variable and fixed components of inspection cost would be closest to:

Caraco 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 cost to manufacture 7,300 units is closest to: