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Exam 22: Analyzing Mixed Costs

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Question 21

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In describing the cost formula equation,Y = a + bX,which of the following is correct:

A) "Y" is the independent variable.
B) "a" is the variable cost per unit.
C) "a" and "b" are valid for all levels of activity.
D) in the high-low method, "b" equals the change in cost divided by the change in activity.

E) None of the above
F) A) and C)

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Question 22

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Least-squares regression selects the values for the intercept and slope of a straight line that minimize the sum of the errors.

A) True
B) False

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Question 23

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(Appendix 5A) Compton Corporation is a wholesale distributor of educational CD-ROMs. The company's records indicate the following: -Using the high-low method of analysis,what are the company's estimated total fixed selling and administrative expenses per year?

Edal 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:

(Appendix 5A) Callander 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 $140.50 per unit. -The best estimate of the total monthly fixed cost is:

Your boss would like you to estimate the fixed and variable components of a particular cost.Actual data for this cost over four recent periods appear below. Using the least-squares regression method,what is the cost formula for this cost?

Hara 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 $159.80 per unit. The best estimate of the total variable cost per unit is:

(Appendix 5A) Inspection costs at one of Ratulowski Corporation's factories are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. -Using the high-low method,the estimate of the fixed component of inspection cost per month is closest to:

(Appendix 5A) One of Matthew Corporation's competitors has learned that Matthew has a total expense per unit of $1.50 at the 15,000 unit level of activity and total expense per unit of $1.45 at the 20,000 unit level of activity. Assume that the relevant range includes all of the activity levels mentioned in this problem. -What would be the competitor's prediction of variable cost per unit for Matthew Corporation?

Andom Corporation has provided the following production and average 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:

The Stephens Leadership Center provides training seminars in personal development and time management.The company is relatively new and management is seeking information regarding the Center's cost structure.The following information has been gathered since the inception of the business in January of the current year: Required: a.Using the high-low method,estimate the variable cost per seminar and the total fixed cost per month. b.Using the least-squares method,estimate the variable cost per seminar and the total fixed cost per month.

Arlo's T-shirt Shop only has three costs: T-shirt cost,rent cost on the shop,and utilities cost.Arlo's sells the T-shirts for $14.50 each.Management has prepared the following cost information for next month: Assume that all of the activity levels mentioned in this problem are within the relevant range. Required: a.Calculate Arlo's total variable cost if 9,000 T-shirts are sold next month. b.Prepare Arlo's contribution format income statement if 10,000 T-shirts are sold.

(Appendix 5A) Recent maintenance costs of Divers Corporation are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours. -Using the least-squares regression method,the estimate of the variable component of maintenance cost per machine-hour is closest to:

Grawburg Inc.maintains a call center to take orders,answer questions,and handle complaints.The costs of the call center for a number of recent months are listed below: Management believes that the cost of the call center is a mixed cost that depends on the number of calls taken. Required: Estimate the variable cost per call and fixed cost per month using the least-squares regression method.

(Appendix 5A) The management of Casablanca Manufacturing Corporation believes that machine-hours is an appropriate measure of activity for overhead cost. Shown below are machine-hours and total overhead costs for the past six months: Assume that the relevant range includes all of the activity levels mentioned in this problem. -If Casablanca expects to incur 185,000 machine hours next month,what will the estimated total overhead cost be using the high-low method?

Farac 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 4,300 units is closest to:

(Appendix 5A) Electrical costs at one of Rome Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours. -Using the high-low method,the estimate of the fixed component of electrical cost per month is closest to:

(Appendix 5A) Babuca 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 5,300 units is closest to:

(Appendix 5A) One of Matthew Corporation's competitors has learned that Matthew has a total expense per unit of $1.50 at the 15,000 unit level of activity and total expense per unit of $1.45 at the 20,000 unit level of activity. Assume that the relevant range includes all of the activity levels mentioned in this problem. -What would be the competitor's prediction of total expected costs at 18,000 units?

A soft drink bottler incurred the following factory utility cost: $9,246 for 5,200 cases bottled and $8,997 for 4,900 cases bottled.Factory utility cost is a mixed cost containing both fixed and variable components.The variable factory utility cost per case bottled is closest to: