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Exam 5: Cost Behavior

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Question 21

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Contribution margin is defined as sales revenue less variable costs.

A) True
B) False

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Question 22

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Carson,which uses the high-low method,reported total costs of $24 per unit at its lowest activity level,when production equaled 10,000 units.When production doubled,at its highest activity level,the total cost per unit dropped to $15.Carson would estimate variable cost per unit as:

A) $9.00
B) $6.00
C) $11.00
D) ($9.00)

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

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Question 23

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Bayshore,Inc. ,has collected the following cost data for various levels of activity: Using the high-low method,determine the variable cost per client served and the total fixed cost.

The high-low method provides a reasonable estimate of the fixed and variable costs as long as:

Mohave,Inc.produces approximately 4,000 units per month,and it places a quality assurance logo on each of its units.To use this logo,it must pay the quality assurance firm $5,000 per month plus $1 per unit.The cost to Mohave of using the quality assurance logo would be a:

Which of the following is a fixed cost?

Silver Products has presented the following information for the past eight months operations: a.Using the high-low method,calculate the fixed cost per month and variable cost per unit. b.What would total costs be for a month with 5,000 units produced?

Flint Enterprises had the following cost and production information for April: Inventory increased by 4,000 units during April.How much greater will Flint Enterprises' income be under absorption costing than under variable costing?

Georgia uses the high-low method of estimating costs.Georgia had total costs of $50,000 at its lowest level of activity,when 5,000 units were sold.When,at its highest level of activity,sales equaled 10,000 units,total costs were $78,000.Georgia would estimate variable cost per unit as:

Cypress,which uses the high-low method,had an average cost per unit of $5 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $3.25 at its highest level of activity when sales equaled 24,000 units.Cypress would estimate fixed costs as:

The unit contribution margin tells how much each additional unit sold will contribute to covering variable costs.

Star,Inc.used Excel to run a least-squares regression analysis,which resulted in the following output: What total cost would Star predict for a month in which production is 2,000 units?

Which of the following statements is true?

A cost driver:

Cardinal uses the high-low method of estimating costs.Cardinal had total costs of $25,000 at its lowest level of activity,when 5,000 units were sold.When,at its highest level of activity,sales equaled 10,000 units,total costs were $39,000.Cardinal would estimate variable cost per unit as:

Campbell,Inc.sold 100,000 units last year for $2.00 each.Variable costs per unit were $0.30 for direct materials,$0.50 for direct labor,and $0.30 for variable overhead.Fixed costs were $60,000 in manufacturing overhead and $40,000 in nonmanufacturing costs. a.What is the total contribution margin? b.What is the unit contribution margin? c.What is the contribution margin ratio? d.If sales increase by 20,000 units,by how much will profits increase?

Jasper Enterprises had the following cost and production information for April: How much greater will Jasper Enterprises' income be under absorption costing than under variable costing?

A cost that remains the same,in total,regardless of changes in activity level is a:

A variable cost increases in total as the volume increases.

Ajax uses the high-low method of estimating costs.Ajax had total costs of $50,000 at its lowest level of activity,when 5,000 units were sold.When,at its highest level of activity,sales equaled 12,000 units,total costs were $78,000.Ajax would estimate fixed costs as: