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Exam 3: Cost Behavior: Analysis and Use

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Question 21

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Grundmann Inc.reports that at an activity level of 6,500 machine-hours in a month,its total variable inspection cost is $487,110 and its total fixed inspection cost is $326,040. -What would be the average fixed inspection cost per unit at an activity level of 6,600 units in a month? Assume that this level of activity is within the relevant range.

A) $125.10
B) $74.89
C) $50.16
D) $49.40

E) A) and C)
F) All of the above

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Question 22

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Baaca 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 monthly fixed manufacturing cost is:

A) $1,424,400
B) $1,506,400
C) $932,400
D) $1,465,400

E) B) and C)
F) C) and D)

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Question 23

Multiple Choice

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

Buffo Company fabricates metal folding chairs.Data concerning the company's revenue and cost structure follow: -If Buffo expects to produce and sell 2,000 units next month,the total expected manufacturing cost would be:

Dabbs 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 monthly fixed manufacturing cost is:

Bacho Corporation reports that at an activity level of 5,400 units,its total variable cost is $416,934 and its total fixed cost is $142,560. -What would be the total variable cost at an activity level of 5,500 units? Assume that this level of activity is within the relevant range.

The cost of goods sold in a merchandising company typically would be classified as a:

Faram 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 cost to manufacture 2,300 units is closest to:

In October,Haldeman Corporation,a manufacturing company,reported the following financial data: The company had no beginning or ending inventories. -The contribution margin for October was:

Baaca 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 cost to manufacture 6,300 units is closest to:

An analysis of past maintenance costs indicates that maintenance cost is an average of $0.20 per machine-hour at an activity level of 10,000 machine-hours and $0.25 per machine-hour at an activity level of 8,000 machine-hours.Assuming that this activity is within the relevant range,what is the total expected maintenance cost if the activity level is 8,700 machine-hours?

Baaca 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 4 x 4 Shop is a large retailer of equipment for pickup trucks.An income statement for the company's bed liner department for the most recent quarter is presented below: The liners sell,on average,for $350 each.The department's variable selling expenses are $35 per liner sold.The remaining selling expenses are fixed.The administrative expenses are 25% variable and 75% fixed.The company purchases its liners from a supplier at a cost of $125 per liner. Required: Prepare an income statement for the quarter,using the contribution approach.

Reddy Company has the following cost formulas for overhead: Based on these cost formulas,the total overhead cost at 600 machine hours is expected to be:

Callaham 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 $115.80 per unit. -The best estimate of the total monthly fixed cost is:

Utility costs at one of Hambley Corporation's factories are listed below: Management believes that utility cost is a mixed cost that depends on machine-hours. Required: Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method.Show your work!

In August,Clarey Corporation,a manufacturing company,reported the following financial data: The company had no beginning or ending inventories. Required: a.Prepare an income statement in good form for August using the traditional approach. b.Prepare an income statement in good form for August using the contribution approach.

A company that produces and sells a single product has provided the following volume and average cost data for two accounting periods: The best estimates of the total fixed cost and variable cost per unit are closest to:

The following production and average cost data for two levels of monthly production volume have been supplied by a company that produces a single product: -The best estimate of the total cost to manufacture 3,200 units is closest to:

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