Exam 3: Cost Behaviour

Refer to Crazy Toys, Inc. What is the most appropriate classification of the cost behaviour of the materials cost?

If output decreases, what will result?

Explain the difference between a committed fixed cost and a discretionary fixed cost.

The following six months of data were collected on electricity cost and the number of machine hours in a factory. Electricity Machine Month cost hours June $25,160 4,500 July 26,170 4,810 August 27,250 5,120 September 26,680 5,010 October 27,950 5,430 November 27,500 5,190 Required: A. Using the high-low method, calculate the variable rate for the electricity cost. B. Using the high-low method, calculate the fixed cost of electricity. C. Estimate the total electricity cost to be incurred in December if 5,300 machine hours are incurred.

Refer to Banff Company. What would be Banff Company's cost formula to estimate the cost of leasing within the relevant range?

Cost relationships may change at output levels outside of the relevant range.

Refer to Nova Scotia Accounting Firm. What does "number of tax returns" represent?

Refer to Lethbridge Company. What is the total variable utility cost for the month of May?

Which processes require one to know how costs change as output changes?

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. -Depreciation of robotic equipment, using a straight-line basis

Total variable costs = variable rate/amount of output.

Refer to Saskatoon Company. Using the least squares (regression) method, what is the forecasted utility cost at 2,000 machine hours (rounded to the nearest dollar)?

Fredericton Company incurred the following costs and machine hours for the months of January and February. Type of cost January February Insurance $10,000 $10,000 Factory supplies 3,000 4,500 Direct labour 20,000 30,000 Maintenance 5,500 5,750 Machine hours 1,000 1,500 Required: A. Assuming that the driver for all costs is machine hours, determine the cost behaviour of each of the four types of costs above (fixed, variable, or mixed). B. Assume that the following is the cost formula for maintenance cost. Total maintenance cost = $5,000 + ($.50 × no. of machine hours) Construct a cost formula to be used to estimate total monthly costs within the relevant range. C. Estimate the total monthly costs to be incurred by Fredericton Company at a level of 1,800 machine hours.

Red Deer Company manufactures motorcycles. The company's management accountant wants to calculate the fixed and variable costs associated with utility cost incurred by the factory. Data for the past six months were collected. Utility Machine Month cost hours March $30,255 2,200 April 32,750 2,525 May 34,712 2,710 June 31,850 2,410 July 30,720 2,290 August 29,980 2,150 Required: A. Using the high-low method, calculate the variable rate per machine hour for the utility cost. B. Using the high-low method, calculate the fixed cost of utilities. C. Construct a cost formula for total utility cost. D. Estimate the cost of utilities if 2,425 machine hours are used.

Refer to Crazy Toys, Inc. What is the total materials cost at a production level of 220,000 toys?

Suppose the cost formula for monthly depreciation cost in a factory is as follows: Total cost = $20,000 Which type of cost does this formula represent?

The cost of advertising is usually a discretionary fixed cost.

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. -Cost of hourly assembly-line workers, with respect to number of hours worked

Which statement best describes a committed fixed cost?

Select the appropriate classification of each of the items listed below. -Cost = intercept + X variable 1 × driver