Question 1

Which of the following is the best example of a variable cost at an equestrian (horse riding) facility?

Accepted Answer

A)  rent on the buildings 
B)  cost of registration forms 
C)  salary of the horse trainer 
D)  salary of the farm manager 
A)  rent on the buildings 
B)  cost of registration forms 
C)  salary of the horse trainer 
D)  salary of the farm manager B

Question 2

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Rent of machinery, under an existing contract

Accepted Answer

A) Discretionary fixed cost 
B) Committed fixed cost 
A) Discretionary fixed cost 
B) Committed fixed cost B

Question 3

Windsor Company incurred the following costs and machine hours during the first three months of the current year. Assume that the driver for all costs is machine hours.
Type of cost January February March
Electricity $20,000 $15,000 $18,000
Depreciation 15,000 15,000 15,000
Factory supplies 9,600 5,600 7,600
Property taxes 12,000 12,000 12,000
Machine hours 1,200 700 950
Required:
A. Using the high-low method, construct a cost formula for electricity cost.
B. If Windsor had total costs in April of $53,000, using the high-low method, what would be the best-guess of how many machine hours they incurred during April?
C. If Windsor expects to incur 1,500 machine hours in May, using the high-low method, what would be the estimate of their total costs?

Accepted Answer

A. ($20,000 - $15,000)/(1,200 ?- 700) = $10.00 per machine hour
$20,000 - ($10.00 × 1,200) = $8,000
Total cost = $8,000 + ($10.00 × no. of machine hours)
B. $53,000 - Fixed costs ($35,000) = $18,000 of variable costs
Variable rate (Factory Supplies; $8.00, Electricity; $10.00) × machine hours = $18,000
Machine hours = 1,000
C. Fixed Costs ($8,000 + $15,000 + $12,000) + ($18.00 × 1,500) = $62,000

Question 4

The relevant range is the range of activity for which the assumed cost relationships are valid.

Accepted Answer

A) True 
 B)False

Question 5

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Factory supplies

Accepted Answer

A) Variable cost 
B) Fixed cost 
A) Variable cost 
B) Fixed cost

Question 6

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Involves plotting data points on a graph

Accepted Answer

A) High-low method 
B) Scattergraph method 
C) Least squares (regression) method 
A) High-low method 
B) Scattergraph method 
C) Least squares (regression) method

Question 7

Match each following terms with their correct description from the items listed below.
-Remains the same in total within the relevant range

Accepted Answer

A) Variable cost 
B) Fixed cost 
C) Mixed cost 
D) Step cost 
A) Variable cost 
B) Fixed cost 
C) Mixed cost 
D) Step cost

Question 8

Using Microsoft Excel, the function REGRESSION returns the parameters of the least squares (regression) method.

Accepted Answer

A) True 
 B)False

Question 9

Match each following terms with their correct description from the items listed below.
-Has an increased fixed component at specific intervals

Accepted Answer

A) Variable cost 
B) Fixed cost 
C) Mixed cost 
D) Step cost 
A) Variable cost 
B) Fixed cost 
C) Mixed cost 
D) Step cost

Question 10

What is an advantage of using the scattergraph method over the high-low method to estimate costs?

Accepted Answer

A)  A cost analyst can review the data visually and eliminate outliers. 
B)  It uses statistics to determine a "best fit" line through a set of data points. 
C)  The cost formula can be determined simply by looking at two points of data. 
D)  It provides a superior quality cost formulae because it relies on the objective judgement of the analysts. 
A)  A cost analyst can review the data visually and eliminate outliers. 
B)  It uses statistics to determine a "best fit" line through a set of data points. 
C)  The cost formula can be determined simply by looking at two points of data. 
D)  It provides a superior quality cost formulae because it relies on the objective judgement of the analysts.

Question 11

Calculation of the cost line using the high-low method tests the lowest cost period to see if it is an outlier.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is the best example of a discretionary fixed cost?

Accepted Answer

A)  executive travel costs 
B)  the cost of leasing machinery 
C)  licence fees for fleet of vehicles 
D)  depreciation on a factory building 
A)  executive travel costs 
B)  the cost of leasing machinery 
C)  licence fees for fleet of vehicles 
D)  depreciation on a factory building

Question 13

Refer to St. John's Company. What can be assumed from the information provided?

Accepted Answer

A)  Insurance is a fixed cost. 
B)  Depreciation is a mixed costs. 
C)  Output decreased from March to April. 
D)  Output stayed the same from March to April. 
A)  Insurance is a fixed cost. 
B)  Depreciation is a mixed costs. 
C)  Output decreased from March to April. 
D)  Output stayed the same from March to April.

Question 14

Machine hours and electricity costs for Wells Industries for the year were as follows:
Machine Electricity
Month Hours Costs
January 2,000 $9,200
February 2,320 10,500
March 1,520 6,750
April 2,480 11,500
May 3,040 14,125
June 2,640 11,000
July 3,280 12,375
August 2,800 11,375
September 1,600 7,750
October 2,960 13,000
November 3,760 15,500
December 3,360 13,875
Required:
A. Using the high-low method, develop an estimate of variable electricity costs per machine hour.
B. Using the high-low method, develop an estimate of fixed electricity costs per month.
C. Using the high-low method, develop a cost function for monthly electricity costs.
D. Estimate electricity costs for a month in which 5,000 machine hours are worked.

Accepted Answer

A. [($15,500 - $6,750)/(3,760 - 1,520)]

Question 15

Sydney Company makes weather balloons. The company controller wanted to calculate the fixed and variable costs associated with the maintenance costs incurred by the factory. Data for the past six months were collected.
Maintenance Machine
Month cost hours
January $10,120 526
February 9,560 389
March 9,712 412
April 10,460 569
May 10,226 541
June 9,686 399
Required:
A. Using the high low method, calculate the fixed cost of maintenance and the variable rate per machine hour.
B. Using the high low method, construct the cost formula for the total maintenance cost.
C. Calculate the budgeted cost for maintenance assuming that 700 hours are worked next month.

Accepted Answer

A. ($10,460 - $9,560)/(569 - 389) = $5.0

Question 16

Which of the following is the best example of a fixed cost?

Accepted Answer

A)  insurance 
B)  electricity 
C)  commissions 
D)  direct materials 
A)  insurance 
B)  electricity 
C)  commissions 
D)  direct materials

Question 17

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Is a statistical method

Accepted Answer

A) High-low method 
B) Scattergraph method 
C) Least squares (regression) method 
A) High-low method 
B) Scattergraph method 
C) Least squares (regression) method

Question 18

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Direct materials

Accepted Answer

A) Variable cost 
B) Fixed cost 
A) Variable cost 
B) Fixed cost

Question 19

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Sales commissions

Accepted Answer

A) Variable cost 
B) Fixed cost 
A) Variable cost 
B) Fixed cost

Question 20

Refer to Saskatoon Company. Using the least squares (regression) method, what is the value of the intercept (rounded to the nearest penny)?

Accepted Answer

A)  $0.99 
B)  $195.35 
C)  $10,630.80 
D)  $190,267.00 
A)  $0.99 
B)  $195.35 
C)  $10,630.80 
D)  $190,267.00

Which of the following is the best example of a variable cost at an equestrian (horse riding) facility?

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Rent of machinery, under an existing contract

The relevant range is the range of activity for which the assumed cost relationships are valid.

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Factory supplies

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Involves plotting data points on a graph

Match each following terms with their correct description from the items listed below. -Remains the same in total within the relevant range

Using Microsoft Excel, the function REGRESSION returns the parameters of the least squares (regression) method.

Match each following terms with their correct description from the items listed below. -Has an increased fixed component at specific intervals

What is an advantage of using the scattergraph method over the high-low method to estimate costs?

Calculation of the cost line using the high-low method tests the lowest cost period to see if it is an outlier.

Which of the following is the best example of a discretionary fixed cost?

Refer to St. John's Company. What can be assumed from the information provided?

Which of the following is the best example of a fixed cost?

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Is a statistical method

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Direct materials

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Sales commissions

Refer to Saskatoon Company. Using the least squares (regression) method, what is the value of the intercept (rounded to the nearest penny)?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters

Exam 3: Cost Behaviour

Which of the following is the best example of a variable cost at an equestrian (horse riding) facility?

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Rent of machinery, under an existing contract

The relevant range is the range of activity for which the assumed cost relationships are valid.

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Factory supplies

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Involves plotting data points on a graph

Match each following terms with their correct description from the items listed below. -Remains the same in total within the relevant range

Using Microsoft Excel, the function REGRESSION returns the parameters of the least squares (regression) method.

Match each following terms with their correct description from the items listed below. -Has an increased fixed component at specific intervals

What is an advantage of using the scattergraph method over the high-low method to estimate costs?

Calculation of the cost line using the high-low method tests the lowest cost period to see if it is an outlier.

Which of the following is the best example of a discretionary fixed cost?

Refer to St. John's Company. What can be assumed from the information provided?

Which of the following is the best example of a fixed cost?

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Is a statistical method

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Direct materials

Select the appropriate classification of each of the costs listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Sales commissions

Refer to Saskatoon Company. Using the least squares (regression) method, what is the value of the intercept (rounded to the nearest penny)?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters