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236. remains the same in total within the relevant range
237. will increase in total in direct proportion to an increase in the cost driver
238. has an increased fixed component at specific intervals
239. has both a variable and a fixed component
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240. the y-intercept corresponds to the fixed cost
241. must be purchased in chunks
242. can be changed by management
243. may involve a long-term contract
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244. total cost = total fixed cost + total variable cost
245. remains constant on a per-unit basis within the relevant range
246. will decrease on a per-unit basis as output increases
247. has a discontinuous cost function
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248. it corresponds to the variable rate
249. it corresponds to the fixed cost
250. it measures output and explains changes in cost
251. its value depends on the value of another variable
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252. results in the best-fitting line through a set of data points
253. may reveal the presence of outliers
254. involves plotting data points on a graph
255. allows a cost analyst to inspect the data visually
256. relies on the quality of the subjective judgment of the analyst
257. is a statistical method
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258. Direct materials for units sold
259. Direct labor for units sold
260. Variable overhead for units sold
261. Fixed factory overhead for the period
262. Only fixed factory overhead for units sold
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263. Variable selling expense
264. Fixed selling expense
265. Administrative expense
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266. $8.83 × independent variable
267. $10,630.80
268. 8.83
269. 99%
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271. Laconic Company manufactures ultra sound equipment. Based on past experience, Laconic has found that total
annual repair and maintenance cost can be represented by the following formula: total annual repair and maintenance cost
= $205,000 + $7.50x, where x = machine hours. Last year, Laconic incurred 145,000 machine hours.
Required:
A. What was the total repair and maintenance cost incurred by Laconic last year?
B. What was the total fixed repair and maintenance cost incurred by Laconic last year?
C. What was the total variable repair and maintenance cost incurred by Laconic last year?
D. What was the repair and maintenance cost per machine hour last year?
E. What was the fixed repair and maintenance cost per machine hour last year?
F. What was the variable repair and maintenance cost per machine hour last year?
272. Harnow Company manufactures drill presses. Based on past experience, Harnow has found that its total overhead
cost can be represented by the following formula: Total overhead cost = $35,500 + $1.25x, where x = number of machine
hours. Last year Harnow incurred 120,000 machine hours.
Required (round to the nearest cent):
A. What was the total overhead cost incurred by Harnow last year?
B. What was the total variable overhead cost incurred by Harnow last year?
C. What was the total overhead cost per machine hour last year?
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D. What was the fixed overhead cost per machine hour last year?
E. If Harnow incurs 140,000 machine hours next year, what will be the total overhead cost per machine hour?
273. The average unit cost at a monthly volume of 9,000 units is $3, and the average unit cost at a monthly volume of
22,500 units is $2.10.
Required:
A. Develop an equation for total monthly costs.
B. What are the total monthly costs if 15,000 units are produced?
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274. Just Burn It! Manufactures blank CDs. The company incurs $22,000 in monthly depreciation costs on its
manufacturing equipment as well as monthly advertising costs of $2,000 to place ads in newspapers and on the radio.
Each CD requires materials and manufacturing overhead resources. On average the company uses 26,000 pounds of
material to manufacture 12,000 CDs per month. Each pound of material costs $2.50. The manufacturing overhead is
driven by machine hours and on average the company incurs $30,000 in manufacturing overhead to produce 12,000 CDs
per month.
Required:
1.) Create a formula for the monthly cost of the CDs for Just Burn It!
2.) If the company plans to manufacture 15,000 CDs next month, what is the expected fixed cost? What is the total
variable cost? What is the total cost?
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275. Boswan Company incurred the following costs and machine hours for the months of April and May.
Type of cost April May
Insurance $10,000 $10,000
Factory supplies 3,000 4,500
Direct labor 20,000 30,000
Maintenance 5,500 5,750
Machine hours 1,000 1,500
Required:
A. Assuming that the driver for all costs is machine hours, determine the cost behavior of each of the four types of
costs above (fixed, variable, or mixed).
B. Assume that the following is the cost formula for maintenance cost.
Total maintenance cost = $5,000 + ($0.50 × no. of machine hours)
Construct a cost formula to be used to estimate total monthly costs within the relevant range.
C. Estimate the total monthly costs to be incurred by Boswan Company at a level of 1,200 machine hours.
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276. Consider each of the following independent situations.
A. The salary of a legal secretary in a law firm.
B. A lease contract for an automobile which requires a monthly payment of $300 plus $.05 per mile.
C. The cost of lumber for a homebuilder.
D. The cost of Internet service which is calculated based on hours of usage.
E. The cost of telephone service which includes a fixed monthly charge of $50 plus $.10 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.
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277. Ross Company has the following information available regarding costs at various levels of monthly production:
Production volume 7,000 units 10,000 units
Direct materials $ 70,000 $100,000
Direct labor 56,000 80,000
Indirect materials 21,000 30,000
Supervisors’ salaries 12,000 12,000
Depreciation on plant 10,000 10,000
Maintenance 32,000 44,000
Utilities 15,000 21,000
Insurance on plant and equipment 1,600 1,600
Property taxes on plant 2,000 2,000
Total $219,600 $300,600
Required:
A. Identify each cost as being variable, fixed, or mixed by writing the name of each
cost under one of the following headings:
Variable Costs Fixed Costs Mixed Costs
B. Develop an equation for total monthly production costs.
C. Predict total costs for a monthly production volume of 8,000 units.
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278. Olson Company makes hearing aids. Olson has found that total electricity cost for the factory can be represented by
the following formula: total annual electricity cost = $149,000 + $2.75x, where x = labor hours. Last year, Olson incurred
212,000 labor hours.
Required:
A. What is the independent variable in Olson’s cost formula?
B. What was the total electricity cost incurred by Olson last year?
C. What would be Olson Company’s estimated electricity cost for next year if they have budgeted 229,000 labor
hours?
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279. Harnock Company constructed the following cost formula for its monthly janitorial cost.
Total monthly janitorial cost = $5,000 + ($.48 × units of output)
Required:
A. Identify the independent variable.
B. Identify the dependent variable.
C. Identify the intercept.
D. Identify the slope.
E. Compute the total janitorial cost if Harnock produces 10,000 units of output next year.
280. Spangle Company constructed the following cost formula for its monthly maintenance cost.
Total monthly maintenance cost = $9,000 + ($1.75 × no. machine hours)
Required:
A. Identify the independent variable.
B. Identify the dependent variable.
C. Identify the intercept.
D. Identify the slope.
E. Compute the total maintenance cost if Spangle uses 12,000 machine hours next year.
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281. Arcadia Company incurred the following costs and machine hours during the first three months of the current year.
Assume that the driver for all costs is machine hours.
Type of cost January February March
Electricity $20,000 $15,000 $18,000
Depreciation 15,000 15,000 15,000
Factory supplies 9,600 5,600 7,600
Property taxes 12,000 12,000 12,000
Machine hours 1,200 700 950
Required:
A. Using the high-low method, construct a cost formula for electricity cost.
B. If Arcadia had total costs in April of $53,000, how many machine hours did they incur during April?
C. If Arcadia expects to incur 1,500 machine hours in May what would be the estimate of their total costs?