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c. (High Point Cost – Low Point Cost) ÷ (High Point Output – Low Point Output)
d. (Absorption Point Cost – Margin Cost) ÷ (High Point Cost + Low Point Cost)
82. The method of least squares
a. uses the results of regression analysis to construct a cost formula.
b. is the least accurate method.
c. analyzes a cost relationship by plotting the data points on a graph.
d. can easily be calculated by hand.
83. Which of the following is true about managerial judgment?
a. It does not consider a manager’s past experience and observation.
b. It is based on mixed costs only.
c. It is the most widely used method in practice.
d. None of these are correct.
Chapter 3
84. The scatter-graph method
a. allows a cost analyst to inspect data visually.
b. is objective.
c. only uses two data points.
d. none of these are correct
85. Pericloud Company had utilities cost of $50,000 at an output level of 10,000 units. The utilities cost was a mixed cost,
and the fixed portion was $14,000. What would the estimate of total utilities cost be at an output level of 20,000 units?
a. $25,000
b. $45,000
c. $86,000
d. $105,000
Chapter 3
86. Glascro Company manufactures skis. The management accountant wants to calculate the fixed and variable costs
associated with the leasing of machinery. Data for the past four months were collected as follows:
Month Lease cost Machine hours
April $15,000 800
May 10,000 600
June 12,000 770
July 16,000 1,000
Using the high-low method, calculate the variable rate for the lease cost.
a. $25
b. $15
c. $65
d. $59
Chapter 3
87. Glascro Company manufactures skis. The management accountant wants to calculate the fixed and variable costs
associated with the leasing of machinery. Data for the past four months were collected as follows:
Month Lease cost Machine hours
April $15,000 800
May 10,000 600
June 12,000 770
July 16,000 1,000
Using the high-low method, calculate the fixed cost of leasing.
a. $2,000
b. $1,500
c. $2,500
d. $1,000
88. Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs
associated with the leasing of machinery. Data for the past four months were collected.
Month Lease cost Machine hours
April $21,000 550
May 16,500 420
June 19,000 510
July 22,230 570
What would Okafor Company’s cost formula be to estimate the cost of leasing within the relevant range?
a. total lease cost = $456 + ($38.20 × machine hours)
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b. total lease cost = $516 + ($38.18 × machine hours)
c. total lease cost = $420 + ($37.25 × machine hours)
d. none of these are correct
89. Glascro Company manufactures skis. The management accountant wants to calculate the fixed and variable costs
associated with the leasing of machinery. Data for the past four months were collected as follows:
Month Lease cost Machine hours
April $15,000 800
May 10,000 600
June 12,000 770
July 16,000 1,000
What would be the total lease cost of Glascro Company’s at a level of 500 machine hours?
a. $16,000
b. $8,500
c. $20,000
d. $17,450
Chapter 3
90. Botana Company constructed the following formula for monthly utility cost.
Total utility cost = $1,200 + ($8.10 × labor hours)
Assume that 775 labor hours are budgeted for the month of April.
Calculate the total variable utility cost for the month of April.
a. $1,200.00
b. $7,477.50
c. $6,277.50
d. $5,077.50
91. Zinc Company constructed the following formula for monthly utility cost.
Total utility cost = $1,000 + ($5 × Number of labor hours)
Assume that 500 labor hours are budgeted for the month of April. Calculate the total utility cost for the month of April.
a. $4,400
b. $2,200
c. $3,500
d. $$6,700
Chapter 3
92. Botana Company constructed the following formula for monthly utility cost.
Total utility cost = $1,200 + ($8.10 × labor hours)
Assume that 775 labor hours are budgeted for the month of April.
If Botana Company incurs 9,600 labor hours for the year, what would be the estimate of total utility cost?
a. $76,560
b. $78,960
c. $92,160
d. none of these are correct
Chapter 3
93. Brona Company makes treadmills. The company controller wants to calculate the fixed and variable costs associated
with the janitorial costs incurred in the factory. Data for the past four months were as follows:
Month Janitorial costs Machine hours
September $12,500 770
October 15,000 800
November 12,000 600
December 13,200 630
Using the high-low method, calculate the fixed cost of the janitorial services.
a. $3,000
b. $6,000
c. $5,230
d. None of these are correct.
94. Maxwell Company makes treadmills. The company controller wants to calculate the fixed and variable costs
associated with the janitorial costs incurred in the factory. Data for the past four months were collected.
Month Janitorial costs Machine hours
September $11,000 575
October 11,400 610
November 10,200 510
December 10,725 550
What would Maxwell Company’s estimate of total janitorial cost be at a level of 600 machine hours?
a. $11,280
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b. $7,500
c. $4,080
d. $6,120
95. PristinDay Company produces handheld calculators. The company controller wanted to calculate the fixed and
variable costs associated with the maintenance cost incurred by the factory. Data for the past four months were collected
as follows:
Maintenance Machine
Month cost hours
June $5,000 350
July 3,000 320
August 4,000 315
September 3,300 220
Coefficients shown by a regression program are as follows:
Intercept 1,000
X Variable 1 8.5
Using the results of regression, calculate the fixed cost of maintenance.
a. $1,000
b. $900
c. $825
d. None of these are correct.
Chapter 3
96. PristinDay Company produces handheld calculators. The company controller wanted to calculate the fixed and
variable costs associated with the maintenance cost incurred by the factory. Data for the past four months were collected
as follows:
Month Maintenance cost Machine hours
June $5,000 350
July 3,000 320
August 4,000 315
September 3,300 220
Coefficients shown by a regression program are as follows:
Intercept 1,000
X Variable 1 8.5
Using the results of regression, calculate the variable rate of maintenance cost.
a. $6.65 per machine hour
b. $10.24 per machine hour
c. $8.50 per machine hour
d. $12.00 per machine hour
Chapter 3
97. Margola Company produces hand-held calculators. The company controller wanted to calculate the fixed and variable
costs associated with the maintenance cost incurred by the factory. Data for the past four months were collected.
Maintenance Machine
Month cost hours
June $4,180 328
July 3,956 310
August 4,686 386
September 4,240 352
Coefficients shown by a regression program are:
Intercept 1,150
X Variable 1 9.06
Using the results of regression, the cost formula for maintenance cost was:
a. $1,150 × machine hours.
b. ($4,686 − $3,956) / (386 − 310).
c. $9.06 × machine hours.
d. $1,150 + ($9.06 × machine hours).
98. PristinDay Company produces handheld calculators. The company controller wanted to calculate the fixed and
variable costs associated with the maintenance cost incurred by the factory. Data for the past four months were collected
as follows:
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Maintenance Machine
Month cost hours
June $5,000 350
July 3,000 320
August 4,000 315
September 3,300 220
Coefficients shown by a regression program are as follows:
Intercept 1,000
X Variable 1 8.5
Using the results of regression, calculate the budgeted cost for maintenance next month assuming that 200 machine hours
are budgeted. (Round the answer to the nearest dollar.)
a. $3,000
b. $2,700
c. $1,200
d. $4,225
99. Marigold Company makes furniture. The company controller wanted to calculate the fixed and variable costs
associated with electricity use in the factory. Data for the past four months were collected as follows:
Electricity Machine
Month cost hours
January $8,000 600
February 7,200 650
March 7,500 580
April 8,200 690
Coefficients shown by a regression program are as follows:
Chapter 3
Intercept 3,500
X Variable 1 7.25
Using the results of regression, calculate the variable rate of the electricity cost.
a. $6.39 per machine hour
b. $7.25 per machine hour
c. $5.75per machine hour
d. None of these are correct.
100. Marigold Company makes furniture. The company controller wanted to calculate the fixed and variable costs
associated with electricity use in the factory. Data for the past four months were collected as follows:
Electricity Machine
Month cost hours
January $8,000 600
February 7,200 650
March 7,500 580
April 8,200 690
Coefficients shown by a regression program are as follows:
Intercept 3,500
X Variable 1 7.25
Using the results of regression, calculate the fixed cost of electricity.
a. $3,500
b. $5,000
c. $2,700
d. None of these are correct.
Chapter 3
101. Martin Company makes cell phones. The company controller wanted to calculate the fixed and variable costs
associated with electricity use in the factory. Data for the past four months were collected.
Electricity Machine
Month cost hours
January $7,560 570
February 8,220 625
March 7,480 546
April 7,186 518
Coefficients shown by a regression program are:
Intercept 2,255
X Variable 1 9.48
Using the results of regression, the cost formula for electricity cost was
a. $9.48 × machine hours
b. $2,255 × machine hours
c. $2,255 + ($9.48 × machine hours)
d. None of these are correct.
Chapter 3
102. Marigold Company makes furniture. The company controller wanted to calculate the fixed and variable costs
associated with electricity use in the factory. Data for the past four months were collected as follows:
Electricity Machine
Month cost hours
January $8,000 600
February 7,200 650
March 7,500 580
April 8,200 690
Coefficients shown by a regression program are as follows:
Intercept 5,937
X Variable 1 2.8
Using the results of regression, what would be the total budgeted cost for electricity next month assuming that 620
machine hours are budgeted? (Round to the nearest dollar.)
a. $5,440
b. $6,000
c. $7,673
d. $4,200
103. The following cost formula was developed using monthly data for a retail clothing store.
Total cost = $50,000 + ($250 × number of customers)
Chapter 3
The number $50,000:
a. is the unknown variable
b. is the dependent variable.
c. is the intercept.
d. is the slope rate.
104. The following cost formula was developed using monthly data for a retail clothing store:
Total cost = $50,000 + ($250 × number of customers)
The number $250:
a. is the committed variable.
b. is the dependent variable.
c. is the mixed rate.
d. is the variable rate.
Chapter 3
105. Which of the following is true for the cost formula given below?
Total cost = $80,000 + ($200 × number of customers)
The term “number of customers” is the:
a. independent variable.
b. dependent variable.
c. regression rate.
d. overhead rate.
106. The following cost formula was developed using monthly data for a retail clothing store.
Total cost = $75,620 + ($242 × number of customers)
The term “total cost”
a. is the independent variable.
b. is the dependent variable.
c. is the intercept.
d. is the variable rate.
Chapter 3
107. The following cost formula was developed using the monthly data for an accounting firm.
Total cost = $87,100 + ($210 × number of tax returns)
The term $87,100
a. is the independent variable.
b. is the dependent variable.
c. is the intercept.
d. is the variable rate.
108. The following cost formula was developed using the monthly data for an accounting firm.
Total cost = $87,100 + ($210 × number of tax returns)
The term “number of tax returns”
a. is the independent variable.
b. is the dependent variable.
c. is the intercept.
d. is the variable rate.
Chapter 3
109. The following cost formula was developed using the monthly data for an accounting firm.
Total cost = $87,100 + ($210 × number of tax returns)
The term $210
a. is the independent variable.
b. is the dependent variable.
c. is the intercept.
d. is the variable rate.
110. Which of the following is true about the cost formula given below?
Total cost = $90,000 + ($300 × number of tax returns)
The term “total cost” is the:
a. independent variable.
b. dependent variable.
c. overhead rate.
d. mixed rate.
Chapter 3
111. The following data for 4 months was collected from a factory.
Utility Labor
Month cost hours
January $30,000 8,205
February 25,000 6,130
March 45,500 12,200
April 25,140 6,280
Select the correct set of high and low months.
a. high: March, low: February
b. high: February, low: March
c. high: April, low: January
d. high: January, low: April