41
40) Wilson Corporation’s activity for the first six of the current year is as follows:
Machine-H
ours
Electrical
Cost
January
2,000
$
February
3,000
$
March
2,400
$
April
1,900
$
May
1,800
$
June
2,100
$
Using the high-low method, the variable cost per machine hour would be:
A) $0.67
B) $0.64
C) $0.40
D) $0.60
Electrical
Cost
High activity level (February)
2,200
Low activity level (May)
1,480
Change
720
41) Wilson Corporation’s activity for the first six of the current year is as follows:
Machine-H
ours
Electrical
Cost
January
2,000
$
February
3,000
$
March
2,400
$
April
1,900
$
May
1,800
$
June
2,100
$
Using the high-low method, the fixed portion of the electrical cost each month would be:
A) $400
B) $760
C) $280
D) $190
Electrical
Cost
High activity level (February)
2,200
Low activity level (May)
1,480
Change
720
42) Inspection costs at one of Ratulowski Corporation’s factories are listed below:
Units Produced
Inspection
Costs
April
777
$
10,176
May
807
$
10,404
June
798
$
10,355
July
835
$
10,665
August
822
$
10,542
September
795
$
10,313
October
805
$
10,409
November
853
$
10,795
December
796
$
10,310
Management believes that inspection cost is a mixed cost that depends on units produced.
Using the high-low method, the estimate of the variable component of inspection cost per unit
produced is closest to:
A) $8.14
B) $7.05
C) $0.12
D) $12.89
Inspection
High level of activity (November)
853
10,795
Low level of activity (April)
777
10,176
Change
43) Inspection costs at one of Ratulowski Corporation’s factories are listed below:
Units Produced
Inspection Costs
April
777
$
10,176
May
807
$
10,404
June
798
$
10,355
July
835
$
10,665
August
822
$
10,542
September
795
$
10,313
October
805
$
10,409
November
853
$
10,795
December
796
$
10,310
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:
A) $10,344
B) $10,441
C) $3,852
D) $10,176
44) Compton Corporation is a wholesale distributor of educational CD-ROMs. The company’s
records indicate the following:
This Year
Last Year
Units Sold
250,000
200,000
Sales
$
1,250,000
$
1,000,000
Cost of goods sold
875,000
700,000
Gross margin
375,000
300,000
Selling and administrative expenses
222,000
210,000
Net operating income
$
153,000
$
90,000
Using the high-low method of analysis, what are the company’s estimated variable selling and
administrative expenses per unit?
A) $0.24
B) $4.17
C) $0.88
D) $0.96
High activity level
250,000
$
Low activity level
250,000
$
Change
$
12,000
45) Compton Corporation is a wholesale distributor of educational CD-ROMs. The company’s
records indicate the following:
This Year
Last Year
Units Sold
250,000
200,000
Sales
$
1,250,000
$
1,000,000
Cost of goods sold
875,000
700,000
Gross margin
375,000
300,000
Selling and administrative expenses
222,000
210,000
Net operating income
$
153,000
$
90,000
Using the high-low method of analysis, what are the company’s estimated total fixed selling and
administrative expenses per year?
A) $60,000
B) $174,000
C) $150,000
D) $162,000
High activity level
250,000
$
Low activity level
200,000
$
Change
$
12,000
46) Compton Corporation is a wholesale distributor of educational CD-ROMs. The company’s
records indicate the following:
This Year
Last Year
Units Sold
250,000
200,000
Sales
$
1,250,000
$
1,000,000
Cost of goods sold
875,000
700,000
Gross margin
375,000
300,000
Selling and administrative expenses
222,000
210,000
Net operating income
$
153,000
$
90,000
What is the company’s contribution margin for this year?
A) $315,000
B) $(667,500)
C) $375,000
D) $213,000
High activity level
250,000
$
Low activity level
250,000
$
Change
$
12,000
Sales
$
1,250,000
Variable expenses:
Cost of goods sold
$
875,000
($0.24 per unit × 250,000 units)
Contribution margin
$
47) The Blaine Corporation is a highly automated manufacturer. At an activity level of 6,000
machine setups, total overhead costs equal $240,000. Of this amount, depreciation totals $80,000
(all fixed) and lubrication totals $72,000 (all variable). The remaining $88,000 of the total
overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals
$112,000.
Assume that the relevant range includes all of the activity levels mentioned in this problem.
The variable cost per setup for utilities is most likely closest to:
A) $ 8.00 per setup
B) $12.44 per setup
C) $ 4.00 per setup
D) $14.66 per setup
48) The Blaine Corporation is a highly automated manufacturer. At an activity level of 6,000
machine setups, total overhead costs equal $240,000. Of this amount, depreciation totals $80,000
(all fixed) and lubrication totals $72,000 (all variable). The remaining $88,000 of the total
overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals
$112,000.
Assume that the relevant range includes all of the activity levels mentioned in this problem.
The total fixed overhead costs for Blaine Corporation are most likely closest to:
A) $112,000
B) $120,000
C) $ 40,000
D) $ 80,000
49) The Blaine Corporation is a highly automated manufacturer. At an activity level of 6,000
machine setups, total overhead costs equal $240,000. Of this amount, depreciation totals $80,000
(all fixed) and lubrication totals $72,000 (all variable). The remaining $88,000 of the total
overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals
$112,000.
Assume that the relevant range includes all of the activity levels mentioned in this problem.
If 7,800 setups are projected for the next period, total expected overhead cost would be closest to:
A) $156,000
B) $236,000
C) $214,400
D) $276,000
50) Babuca Corporation has provided the following production and total cost data for two levels of
monthly production volume. The company produces a single product.
Production volume
5,000
units
6,000
units
Direct materials
$
103,500
$
124,200
Direct labor
$
282,500
$
339,000
Manufacturing overhead
$
667,000
$
679,800
The best estimate of the total monthly fixed manufacturing cost is:
A) $1,098,000
B) $1,053,000
C) $1,143,000
D) $603,000
51) Babuca Corporation has provided the following production and total cost data for two levels of
monthly production volume. The company produces a single product.
Production volume
5,000
units
6,000
units
Direct materials
$
103,500
$
124,200
Direct labor
$
282,500
$
339,000
Manufacturing overhead
$
667,000
$
679,800
The best estimate of the total variable manufacturing cost per unit is:
A) $90.00
B) $77.20
C) $12.80
D) $20.70
52) Babuca Corporation has provided the following production and total cost data for two levels of
monthly production volume. The company produces a single product.
Production volume
5,000
units
6,000
units
Direct materials
$
103,500
$
124,200
Direct labor
$
282,500
$
339,000
Manufacturing overhead
$
667,000
$
679,800
The best estimate of the total cost to manufacture 5,300 units is closest to:
A) $1,116,180
B) $1,062,915
C) $1,080,000
D) $1,009,650
53) Wuensch Inc., an escrow agent, has provided the following data concerning its office
expenses:
Escrows Completed
Office
Expenses
April
53
$
7,427
May
94
$
9,201
June
37
$
6,769
July
87
$
8,902
August
40
$
6,875
September
38
$
6,797
October
82
$
8,681
November
35
$
6,678
December
62
$
7,836
Management believes that office expense is a mixed cost that depends on the number of escrows
completed. Note: Real estate purchases usually involve the services of an escrow agent that holds
funds and prepares documents to complete the transaction.
Using the high-low method, the estimate of the variable component of office expense per escrow
completed is closest to:
A) $45.44
B) $42.76
C) $88.22
D) $131.00