Exam 3: Cost Behaviour

Refer to Regina Company. What was the cost formula for equipment maintenance?

Which factor causes or leads to a change in a cost or activity?

As output decreases, variable cost per unit will also decrease.

Nunavut Company operates a chain of cozy coffee shops. The company's chief executive officer is interested in accumulating some information on the manufacturing overhead costs incurred by the company. You have been asked to analyze the following six months' worth of data.Manufacturing overhead No. of Month cost Labour Hours January $60,160 867 February 56,500 624 March 58,900 689 April 63,500 974 May 59,325 730 June 62,400 901 Required: A. Using the high low method, construct a cost formula for the total manufacturing overhead cost. B. The CEO would like to limit total manufacturing overhead cost in future months to 20% of total revenues. Will that be possible if total revenues are expected to average $300,000 per month and total labour hours per month are expected to average 1,000? Show all of your calculations. C. Calculate the estimated total cost of manufacturing overhead assuming 1,000 labour hours are incurred in a given month.

The high-low method is the most accurate method to separate the cost behaviour of a mixed cost.

Discretionary fixed costs often involve a long-term contract.

Which relationship is characteristic of per-unit variable costs?

Refer to Prince Edward Company. What is the fixed cost of maintenance when using the result of regression?

Refer to Kelowna Company. What is the value of a dependent variable used to calculate the cost line when using the high-low method?

Refer to Toronto Company. Assume that 640 machine hours are budgeted. What would be the total budgeted cost for electricity next month?

Consider each of the following independent situations. A. The salary of a legal secretary in a law firm B. A lease contract for a truck that requires a monthly payment of $200 plus $0.07 per kilometre C. The cost of lumber for a homebuilder D. The cost of internet service that is calculated based on hours of usage E. The cost of cell phone contract that includes a fixed monthly charge of $90 plus $.05 a minute for long-distance calls F. The salary cost of seasonal tax preparers for a CPA firm. One tax preparer can prepare 100 tax returns per month G. A factory supervisor's salary H. The cost of sugar in the production of soft drinks Required: For each situation, describe the cost as one of the following: fixed cost, variable cost, mixed cost, or step cost.