Version 1 1
Student name:__________
1) 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:
At 8,000 T-shirts At 10,000 T-shirts
T-shirt cost $ 48,000 $ 60,000
Rent cost $ 3,600 $ 3,600
Utilities cost $ 6,800 $ 8,300
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.
2) Butler Sales Company is a distributor that has an exclusive franchise to sell a particular
product made by another company. Butler Sales Company’s traditional format income statements
for the last two years are given below:
This Year Last Year
Units sold 200,000 160,000
Sales revenue $ 1,000,000 $ 800,000
Cost of goods sold 700,000 560,000
Gross margin 300,000 240,000
Selling and administrative expense 210,000 198,000
Net operating income $ 90,000 $ 42,000
Selling and administrative expense is a mixture of fixed costs and variable costs that vary with
respect to the number of units sold.
Required:
a. Estimate the company’s variable selling and administration expense per unit, and its total
fixed selling and administrative expense per year.
b. Compute the company’s contribution margin for this year.
Version 1 2
3) 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:
Seminars Offered Costs Incurred
January 10 $ 17,000
February 12 $ 18,800
March 15 $ 20,900
April 18 $ 23,762
May 16 $ 21,800
June 13 $ 19,400
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.
4) The accounting department of Archer Company, a merchandising company, has prepared
the following analysis:
Cost Cost Formula
Cost of goods sold $ 56 per unit
Sales commissions 12% of sales
Advertising expense $ 300,000 per month
Administrative salaries $ 160,000 per month
Billing expense ?
Version 1 3
Depreciation expense $ 62,000 per month
The accounting department feels that billing expense is a mixed cost, containing both fixed and
variable cost elements. The billing expenses and sales in units over the last several months
follow:
Units Sold (thousands) Billing Expense
January 9 $ 30,000
February 11 $ 33,000
March 14 $ 36,000
April 17 $ 42,000
May 15 $ 39,000
June 12 $ 35,000
The accounting department now plans to develop a cost formula for billing expense so that a
contribution format income statement can be prepared for management’s use.
Required:
a. Using the least-squares method, estimate the cost formula for billing expense. Round off both
the fixed cost and the variable cost per thousand units sold to the nearest whole dollar.
b. Assume that the company plans to sell 30,000 units during July at a selling price of $100 per
unit. Prepare a budgeted income statement for the month, using the contribution format.
5) Grawburg Incorporated 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:
Calls Taken Call Center Cost
April 7,550 $ 81,853
May 7,519 $ 81,665
June 7,560 $ 81,917
July 7,558 $ 81,889
August 7,525 $ 81,708
September 7,539 $ 81,787
October 7,582 $ 82,048
November 7,569 $ 81,985
Version 1 4
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. (Round the “Variable cost” to 2 decimal places and the “Fixed cost” to the nearest
dollar amount.)
6) Furlan Printing Corporation, a book printer, has provided the following data:
Titles Printed Press Setup Cost
May 29 $ 3,185
June 30 $ 3,218
July 42 $ 3,703
August 24 $ 3,011
September 40 $ 3,622
October 38 $ 3,566
November 39 $ 3,568
December 35 $ 3,250
Management believes that the press setup cost is a mixed cost that depends on the number of
titles printed. (A specific book that is to be printed is called a “title”. Typically, thousands of
copies will be printed of each title. Specific steps must be taken to setup the presses for printing
each title-for example, changing the printing plates. The costs of these steps are the press setup
costs.)
Required:
Estimate the variable cost per title printed and the fixed cost per month using the least-squares
regression method. (Round the “Variable cost” to 2 decimal places and the “Fixed cost” to
the nearest dollar amount.)
Version 1 5
7) Utility costs at one of Hannemann Corporation’s factories are listed below:
Machine-Hours Utility Cost
March 5,021 $ 52,824
April 5,076 $ 53,287
May 5,074 $ 53,263
June 5,040 $ 52,991
July 5,087 $ 53,371
August 5,073 $ 53,251
September 5,075 $ 53,252
October 5,034 $ 52,916
November 5,062 $ 53,137
Management believes that utility cost is a mixed cost that depends on machine-hours.
Required:
Estimate the variable cost per machine-hour and the fixed cost per month using the high-low
method.
8) Swofford Incorporated has provided the following data concerning its maintenance costs:
Machine-Hours Maintenance Cost
March 4,440 $ 50,950
April 4,431 $ 50,877
May 4,412 $ 50,696
June 4,460 $ 51,113
July 4,414 $ 50,711
August 4,433 $ 50,900
September 4,443 $ 50,976
October 4,415 $ 50,730
November 4,391 $ 50,530
Version 1 6
Management believes that maintenance cost is a mixed cost that depends on machine-hours.
Required:
Estimate the variable cost per machine-hour and the fixed cost per month using the high-low
method.
9) The management of Dethlefsen Corporation would like to have a better understanding of
the behavior of its inspection costs. The company has provided the following data:
Direct Labor-Hours Inspection Cost
January 5,089 $ 33,122
February 5,042 $ 32,929
March 5,026 $ 32,870
April 5,073 $ 33,065
May 5,029 $ 32,906
June 5,040 $ 32,913
July 5,070 $ 33,050
August 5,027 $ 32,875
September 4,995 $ 32,746
Management believes that inspection cost is a mixed cost that depends on direct labor-hours.
Required:
Estimate the variable cost per direct labor-hour and the fixed cost per month using the high-low
method.
Version 1 7
10) Grawburg Incorporated 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:
Calls Taken Call Center Cost
April 9,030 $ 112,323
May 9,017 $ 112,278
June 9,035 $ 112,341
July 9,065 $ 112,458
August 9,015 $ 112,290
September 9,061 $ 112,419
October 9,070 $ 112,463
November 9,067 $ 112,439
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.
11) Furlan Printing Corporation, a book printer, has provided the following data:
Titles Printed Press Setup Cost
May 40 $ 6,649
June 38 $ 6,438
July 25 $ 5,307
August 28 $ 5,564
September 33 $ 6,030
October 27 $ 5,505
November 39 $ 6,551
December 36 $ 6,275
Management believes that the press setup cost is a mixed cost that depends on the number of
titles printed. (A specific book that is to be printed is called a “title”. Typically, thousands of
copies will be printed of each title. Specific steps must be taken to setup the presses for printing
each title-for example, changing the printing plates. The costs of these steps are the press setup
costs.)
Required:
Estimate the variable cost per title printed and the fixed cost per month using the least-squares
regression method.
Version 1 8
12) The management of Rutledge Corporation would like to better understand the behavior of
the company’s warranty costs. Those costs are listed below for a number of recent months:
Product Returns Warranty Cost
March 30 $ 3,648
April 37 $ 4,074
May 43 $ 4,460
June 41 $ 4,330
July 32 $ 3,756
August 48 $ 4,782
September 35 $ 3,932
October 33 $ 3,823
Management believes that warranty cost is a mixed cost that depends on the number of product
returns.
Required:
Estimate the variable cost per product return and the fixed cost per month using the least-
squares regression method.
13) Below are cost and activity data for a particular cost over the last four periods. Your boss
has asked you to analyze this cost so that management will have a better understanding of how
this cost changes in response to changes in activity.
Activity Cost
Period 1 46 $ 791
Period 2 40 $ 738
Period 3 47 $ 807
Period 4 41 $ 746
Required:
Using the least-squares regression method, estimate the cost formula for this cost.
Version 1 9
14) Which of the following statements is true when referring to the high-low method of cost
analysis?
A) The high-low method has no major weaknesses.
B) The high-low method is very hard to apply.
C) In essence, the high-low method draws a straight line through two data points.
D) The high-low method uses all of the available data to estimate fixed and variable
costs.
15) 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.
16) Larker Brothers, Incorporated, used the high-low method to derive its cost formula for
electrical power cost. According to the cost formula, the variable cost per unit of activity is $4
per machine-hour. Total electrical power cost at the high level of activity was $19,200 and at the
low level of activity was $18,400. If the high level of activity was 3,300 machine hours, then the
low level of activity was:
Version 1 10
A) 3,100 machine hours
B) 3,200 machine hours
C) 3,000 machine hours
D) 2,900 machine hours
17) Gamach 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 $104.50 per unit.
Sales volume (units) 5,000 6,000
Cost of sales $295,000 $354,000
Selling and administrative costs $186,000 $202,800
The best estimate of the total monthly fixed cost is:
A) $102,000
B) $518,900
C) $556,800
D) $481,000
18) 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.
Sales volume (units) 6,000 7,000
Cost of sales $363,600 $424,200
Selling and administrative costs $531,000 $547,400
The best estimate of the total variable cost per unit is: (Round your intermediate calculations
to 2 decimal places.)
A) $77.00
B) $60.60
C) $149.10
D) $138.80
Version 1 11
19) Maintenance costs at a Straiton Corporation factory are listed below:
Machine-Hours Maintenance Cost
March 3,627 $54,384
April 3,588 $53,980
May 3,637 $54,453
June 3,638 $54,491
July 3,572 $53,843
August 3,611 $54,196
September 3,644 $54,550
October 3,609 $54,181
November 3,669 $54,767
Management believes that maintenance cost is a mixed cost that depends on machine-hours. Use
the high-low method to estimate the variable and fixed components of this cost. Compute the
variable component first and round off to the nearest whole cent. Compute the fixed component
second and round off to the nearest whole dollar. These estimates would be closest to: (Round
your intermediate calculations to 2 decimal places.)
A) $0.10 per machine-hour; $54,382 per month
B) $15.00 per machine-hour; $54,316 per month
C) $9.12 per machine-hour; $21,309 per month
D) $9.53 per machine-hour; $19,801 per month
20) Iacob 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 $166.00 per unit.
Sales volume (units) 9,200 10,580
Cost of sales $699,200 $804,080
Selling and administrative costs $704,000 $737,120
The best estimate of the total contribution margin when 10,000 units are sold is:
A) $774,030
B) $660,000
C) $212,370
D) $304,250
Version 1 12
21) Iacob 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 $103.40 per unit.
Sales volume (units) 5,000 6,000
Cost of sales $315,500 $378,600
Selling and administrative costs $162,500 $177,600
The best estimate of the total contribution margin when 5,300 units are sold is: (Round your
intermediate calculations to 2 decimal places.)
A) $56,710
B) $133,560
C) $41,340
D) $213,590
22) Edal 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 $266,500 $319,800
Direct labor $52,000 $62,400
Manufacturing overhead $748,500 $769,200
The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate
calculations to 2 decimal places.)
A) $63.70
B) $84.40
C) $53.30
D) $20.70
23) Bakan Corporation has provided the following production and average cost data for two
levels of monthly production volume. The company produces a single product.
Production volume 13,300 units 14,300 units
Direct materials $ 96.70 per unit $ 96.70 per unit
Direct labor $ 24.60 per unit $ 24.60 per unit
Manufacturing overhead $ 74.30 per unit $ 70.30 per unit
Version 1 13
The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate
calculations to 2 decimal places.)
A) $167.00
B) $138.40
C) $159.50
D) $121.30
24) Bakan Corporation has provided the following production and average cost data for two
levels of monthly production volume. The company produces a single product.
Production volume 3,000 units 4,000 units
Direct materials $ 86.30 per unit $ 86.30 per unit
Direct labor $ 26.40 per unit $ 26.40 per unit
Manufacturing overhead $ 75.90 per unit $ 60.40 per unit
The best estimate of the total variable manufacturing cost per unit is: (Round your intermediate
calculations to 2 decimal places.)
A) $126.60
B) $86.30
C) $13.90
D) $112.70
25) Supply costs at Coulthard Corporation’s chain of gyms are listed below:
Client-Visits Supply Cost
March 11,649 $26,575
April 11,445 $26,438
May 11,977 $26,795
June 12,200 $26,944
July 11,709 $26,615
August 11,195 $26,271
September 11,989 $26,803
October 11,680 $26,596
November 11,828 $26,695
Version 1 14
Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-
low method to estimate the variable and fixed components of this cost. Compute the variable
component first, rounding off to the nearest whole cent. Then compute the fixed component,
rounding off to the nearest whole dollar. Those estimates are closest to: (Round your
intermediate calculations to 2 decimal places.)
A) $2.36 per client-visit; $26,616 per month
B) $1.25 per client-visit; $11,712 per month
C) $0.71 per client-visit; $18,265 per month
D) $0.67 per client-visit; $18,770 per month
26) Supply costs at Coulthard Corporation’s chain of gyms are listed below:
Client-Visits Supply Cost
March 12,855 $23,598
April 12,283 $23,278
May 13,104 $23,742
June 12,850 $23,607
July 12,493 $23,415
August 12,794 $23,562
September 12,686 $23,496
October 12,765 $23,541
November 13,018 $23,687
Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-
low method to estimate the variable and fixed components of this cost. Compute the variable
component first, rounding off to the nearest whole cent. Then compute the fixed component,
rounding off to the nearest whole dollar. Those estimates are closest to: (Round your
intermediate calculations to 2 decimal places.)
A) $1.85 per client-visit; $23,547 per month
B) $1.77 per client-visit; $557 per month
C) $0.55 per client-visit; $16,579 per month
D) $0.57 per client-visit; $16,273 per month
27) Electrical costs at one of Finfrock Corporation’s factories are listed below:
Machine-Hours Electrical Cost
March 3,642 $40,537
Version 1 15
April 3,616 $40,319
May 3,667 $40,706
June 3,634 $40,462
July 3,665 $40,703
August 3,659 $40,680
September 3,644 $40,547
October 3,612 $40,268
November 3,624 $40,364
Management believes that electrical cost is a mixed cost that depends on machine-hours. Use the
high-low method to estimate the variable and fixed components of this cost. Compute the
variable component first, rounding off to the nearest whole cent. Then compute the fixed
component, rounding off to the nearest whole dollar. Those estimates are closest to: (Round
your intermediate calculations to 2 decimal places.)
A) $7.96 per machine-hour; $11,517 per month
B) $11.13 per machine-hour; $40,510 per month
C) $9.61 per machine-hour; $5,533 per month
D) $0.13 per machine-hour; $40,246 per month
28) Deidoro Company has provided the following data for maintenance cost:
Prior Year Current Year
Machine hours 14,600 17,700
Maintenance cost $35,600 $39,320
Maintenance cost is a mixed cost with variable and fixed components. The fixed and variable
components of maintenance cost are closest to: (Round your intermediate calculations to 2
decimal places.)
A) $35,600 per year; $2.221 per machine hour
B) $18,080 per year; $2.221 per machine hour
C) $18,080 per year; $1.200 per machine hour
D) $35,600 per year; $1.200 per machine hour
29) Deidoro Company has provided the following data for maintenance cost:
Prior Year Current Year
Machine hours 8,000 10,000
Maintenance cost $26,600 $31,000
Version 1 16
Maintenance cost is a mixed cost with variable and fixed components. The fixed and variable
components of maintenance cost are closest to: (Round your intermediate calculations to 2
decimal places.)
A) $26,600 per year; $3.10 per machine hour
B) $9,000 per year; $2.20 per machine hour
C) $9,000 per year; $3.10 per machine hour
D) $26,600 per year; $2.20 per machine hour
30) Caraco Corporation has provided the following production and average cost data for two
levels of monthly production volume. The company produces a single product.
Production volume 5,300 units 6,300 units
Direct materials $74.90 per unit $74.90 per unit
Direct labor $54.20 per unit $54.20 per unit
Manufacturing overhead $72.80 per unit $65.80 per unit
The best estimate of the total cost to manufacture 5,700 units is closest to: (Round your
intermediate calculations to 2 decimal places.)
A) $1,151,070
B) $1,139,895
C) $1,101,900
D) $1,133,190
31) Caraco Corporation has provided the following production and average cost data for two
levels of monthly production volume. The company produces a single product.
Production volume 7,000 units 8,000 units
Direct materials $ 87.40 per unit $ 87.40 per unit
Direct labor $ 20.20 per unit $ 20.20 per unit
Manufacturing overhead $ 101.50 per unit $ 90.80 per unit
The best estimate of the total cost to manufacture 7,300 units is closest to: (Round your
intermediate calculations to 2 decimal places.)
Version 1 17
A) $1,487,375
B) $1,448,320
C) $1,500,750
D) $1,526,430
32) A soft drink bottler incurred the following factory utility cost: $3,886 for 900 cases
bottled and $3,944 for 1,100 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:
A) $4.32
B) $0.29
C) $3.59
D) $3.53
33) 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:
A) $1.81
B) $1.78
C) $1.84
D) $0.83
34) Andom Corporation has provided the following production and average cost data for two
levels of monthly production volume. The company produces a single product.
Production volume 1,000 units 2,000 units
Direct materials $15.20 per unit $15.20 per unit
Direct labor $30.50 per unit $30.50 per unit
Manufacturing overhead $54.10 per unit $37.40 per unit
Version 1 18
The best estimate of the total monthly fixed manufacturing cost is: (Round your intermediate
calculations to 2 decimal places.)
A) $74,800
B) $54,100
C) $99,800
D) $33,400
35) The following data pertains to activity and maintenance cost for two recent periods:
Activity level (units) 8,000 7,000
Maintenance cost $34,000 $31,500
Maintenance cost is a mixed cost with both fixed and variable components. Using the high-low
method, the cost formula for maintenance cost is: (Round your intermediate calculations to 2
decimal places.)
A) Y = $4.25 X
B) Y = $14,000 + $2.50 X
C) Y = $2,500 + $4.25 X
D) Y = $4.50 X
36) Farac 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 4,000 units 5,000 units
Direct materials $ 208,800 $ 261,000
Direct labor $ 119,200 $ 149,000
Manufacturing overhead $ 319,200 $ 329,500
The best estimate of the total cost to manufacture 4,300 units is closest to: (Round your
intermediate calculations to 2 decimal places.)
Version 1 19
A) $674,890
B) $665,855
C) $695,740
D) $635,970
37) The following data pertains to activity and utility cost for two recent periods:
Activity level (units) 15,000 12,000
Utility cost $24,750 $21,000
Utility cost is a mixed cost with both fixed and variable components. Using the high-low
method, the cost formula for utility cost is: (Round your intermediate calculations to 2
decimal places.)
A) Y = $1.65 X
B) Y = $1.75 X
C) Y = $3,750 + $1.75 X
D) Y = $6,000 + $1.25 X
38) Dacosta 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 6,000 units 7,000 units
Direct materials $ 369,600 $ 431,200
Direct labor $ 309,600 $ 361,200
Manufacturing overhead $ 919,800 $ 937,300
The best estimate of the total monthly fixed manufacturing cost is: (Round your intermediate
calculations to 2 decimal places.)
A) $1,599,000
B) $1,664,350
C) $814,800
D) $1,729,700
Version 1 20
39) Seifer Incorporated’s inspection costs are listed below:
Units Produced Inspection Costs
April 119 $8,558
May 117 $8,535
June 113 $8,415
July 125 $8,736
August 152 $9,357
September 108 $8,320
October 120 $8,603
November 192 $10,337
Management believes that inspection cost is a mixed cost that depends on the number of units
produced. Using the least-squares regression method, the estimates of the variable and fixed
components of inspection cost would be closest to:
A) $24.08 per unit plus $5,709 per month
B) $67.74 per unit plus $8,858 per month
C) $24.37 per unit plus $5,658 per month
D) $24.01 per unit plus $5,727 per month
40) 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.
Activity Cost
Period 1 34 $388
Period 2 33 $377
Period 3 30 $362
Period 4 35 $406
Using the least-squares regression method, what is the cost formula for this cost?
A) Y = $106.64 + $8.48X
B) Y = $0.00 + $15.29X
C) Y = $114.54 + $8.14X
D) Y = $119.97 + $5.38X
Version 1 21
41) 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.
Activity Cost
Period 1 22 $121
Period 2 28 $132
Period 3 21 $117
Period 4 29 $134
Using the least-squares regression method, what is the cost formula for this cost?
A) Y = $75.89 + $1.02X
B) Y = $72.64 + $2.13X
C) Y = $0.00 + $5.04X
D) Y = $75.50 + $2.02X
42) The management of Hamano Corporation would like for you to analyze their repair costs,
which are listed below:
Machine-Hours Repair Costs
April 2,138 $33,092
May 2,167 $33,110
June 2,124 $33,087
July 2,194 $33,110
August 2,109 $33,020
September 2,210 $33,174
October 2,135 $33,061
November 2,205 $33,147
Management believes that repair cost is a mixed cost that depends on the number of machine-
hours. Using the least-squares regression method, the estimates of the variable and fixed
components of repair cost would be closest to:
A) $1.38 per machine-hour plus $30,110 per month
B) $0.82 per machine-hour plus $31,676 per month
C) $1.11 per machine-hour plus $30,701 per month
D) 15.13 per machine-hour plus $33,640 per month
43) The management of Hamano Corporation would like for you to analyze their repair costs,
which are listed below:
Machine-Hours Repair Costs
Version 1 22
April 4,459 $98,523
May 4,426 $98,296
June 4,493 $98,781
July 4,417 $98,207
August 4,432 $98,349
September 4,446 $98,420
October 4,489 $98,749
November 4,475 $98,654
Management believes that repair cost is a mixed cost that depends on the number of machine-
hours. Using the least-squares regression method, the estimates of the variable and fixed
components of repair cost would be closest to:
A) $22.11 per machine-hour plus $98,497 per month
B) $7.37 per machine-hour plus $65,670 per month
C) $8.19 per machine-hour plus $62,015 per month
D) $7.55 per machine-hour plus $64,859 per month
44) 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?
A) $1.30
B) $0.77
C) $1.50
D) $1.45
45) 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 fixed cost per period? (Round your
intermediate calculations to 2 decimal places.)
Version 1 23
A) $22,500
B) $28,000
C) $13,600
D) $3,000
46) 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? (Round
your intermediate calculations to 2 decimal places.)
A) $16,860
B) $26,400
C) $29,100
D) $30,000
47) The following production and average cost data for two levels of monthly production
volume have been supplied by a company that produces a single product:
Production volume 2,000 units 4,000 units
Direct materials $88.40 per unit $88.40 per unit
Direct labor $20.60 per unit $20.60 per unit
Manufacturing overhead $86.90 per unit $55.30 per unit
The best estimate of the total monthly fixed manufacturing cost is: (Round your intermediate
calculations to 2 decimal places.)
A) $221,200
B) $391,800
C) $173,800
D) $126,400
Version 1 24
48) The following production and average cost data for two levels of monthly production
volume have been supplied by a company that produces a single product:
Production volume 2,000 units 4,000 units
Direct materials $88.40 per unit $88.40 per unit
Direct labor $20.60 per unit $20.60 per unit
Manufacturing overhead $86.90 per unit $55.30 per unit
The best estimate of the total variable manufacturing cost per unit is: (Round your
intermediate calculations to 2 decimal places.)
A) $132.70
B) $88.40
C) $23.70
D) $109.00
49) The following production and average cost data for two levels of monthly production
volume have been supplied by a company that produces a single product:
Production volume 2,000 units 4,000 units
Direct materials $88.40 per unit $88.40 per unit
Direct labor $20.60 per unit $20.60 per unit
Manufacturing overhead $86.90 per unit $55.30 per unit
The best estimate of the total cost to manufacture 2,200 units is closest to: (Round your
intermediate calculations to 2 decimal places.)
A) $396,220
B) $430,980
C) $361,460
D) $418,340
50) Wilson Corporation’s activity for the first six of the current year is as follows:
Machine-Hours Electrical Cost
January 2,000 $1,560
February 3,000 $2,200
March 2,400 $1,750
April 1,900 $1,520
May 1,800 $1,480
June 2,100 $1,600
Version 1 25
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
51) Wilson Corporation’s activity for the first six of the current year is as follows:
Machine-Hours Electrical Cost
January 2,000 $1,560
February 3,000 $2,200
March 2,400 $1,750
April 1,900 $1,520
May 1,800 $1,480
June 2,100 $1,600
Using the high-low method, the fixed portion of the electrical cost each month would be:
(Round your intermediate calculations to 2 decimal places.)
A) $400
B) $760
C) $280
D) $190
52) 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:
Version 1 26
A) $8.14
B) $7.05
C) $0.12
D) $12.89
53) Inspection costs at one of Ratulowski Corporation’s factories are listed below:
Units Produced Inspection Costs
April 916 $17,312
May 971 $17,700
June 922 $17,365
July 906 $17,210
August 928 $17,394
September 913 $17,280
October 930 $17,432
November 870 $16,750
December 909 $17,238
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: (Round your intermediate calculations to 2 decimal places.)
A) $17,220.00
B) $16,751.00
C) $17,211.00
D) $8,562.89
54) 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
Version 1 27
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: (Round your intermediate calculations to 2 decimal places.)
A) $10,344
B) $10,441
C) $3,852
D) $10,176
55) 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
56) 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
Version 1 28
Using the high-low method of analysis, what are the company’s estimated total fixed selling and
administrative expenses per year? (Round your intermediate calculations to 2 decimal
places.)
A) $60,000
B) $174,000
C) $150,000
D) $162,000
57) 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? (Round your intermediate
calculations to 2 decimal places.)
A) $315,000
B) $(667,500)
C) $375,000
D) $213,000
58) 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:
Version 1 29
A) $8.00 per setup
B) $12.44 per setup
C) $4.00 per setup
D) $14.66 per setup
59) 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
60) 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
Version 1 30
61) 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 8,900 units 10,000 units
Direct materials $ 535,780 $ 602,000
Direct labor $ 200,250 $ 225,000
Manufacturing overhead $ 1,004,200 $ 1,027,630
The best estimate of the total monthly fixed manufacturing cost is: (Round your intermediate
calculations to 2 decimal places.)
A) $817,630
B) $811,630
C) $822,130
D) $814,630
62) 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: (Round your intermediate
calculations to 2 decimal places.)
A) $1,098,000
B) $1,053,000
C) $1,143,000
D) $603,000
63) Babuca Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
Version 1 31
Production volume 15,300 units 17,000 units
Direct materials $ 931,770 $ 1,035,300
Direct labor $ 344,250 $ 382,500
Manufacturing overhead $ 1,011,500 $ 1,036,150
The best estimate of the total variable manufacturing cost per unit is: (Round your
intermediate calculations to 2 decimal places.)
A) $97.90
B) $89.55
C) $83.40
D) $87.20
64) 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: (Round your
intermediate calculations to 2 decimal places.)
A) $90.00
B) $77.20
C) $12.80
D) $20.70
65) 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 14,200 units 16,000 units
Direct materials $ 921,580 $ 1,038,400
Version 1 32
Direct labor $ 248,500 $ 280,000
Manufacturing overhead $ 1,008,200 $ 1,038,260
The best estimate of the total cost to manufacture 15,100 units is closest to: (Round your
intermediate calculations to 2 decimal places.)
A) $2,244,160
B) $2,314,090
C) $2,267,470
D) $2,174,230
66) 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: (Round your
intermediate calculations to 2 decimal places.)
A) $1,116,180
B) $1,062,915
C) $1,080,000
D) $1,009,650
67) Wuensch Incorporated, 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
Version 1 33
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
68) Wuensch Incorporated, 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 fixed component of office expense per month is
closest to: (Round your intermediate calculations to 2 decimal places.)
A) $7,685
B) $7,182
C) $6,678
D) $5,182
Version 1 34
69) Electrical costs at one of Rome Corporation’s factories are listed below:
Machine-Hours Electrical Cost
March 458 $ 1,007
April 423 $ 934
May 440 $ 979
June 409 $ 902
July 426 $ 952
August 372 $ 822
September 414 $ 926
October 431 $ 949
November 468 $ 1,025
Management believes that electrical cost is a mixed cost that depends on machine-hours.
Using the high-low method, the estimate of the variable component of electrical cost per
machine-hour is closest to:
A) $2.11
B) $1.80
C) $2.21
D) $0.47
70) Electrical costs at one of Rome Corporation’s factories are listed below:
Machine-Hours Electrical Cost
March 458 $ 1,007
April 423 $ 934
May 440 $ 979
June 409 $ 902
July 426 $ 952
August 372 $ 822
September 414 $ 926
October 431 $ 949
November 468 $ 1,025
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: (Round your intermediate calculations to 2 decimal places.)
Version 1 35
A) $822
B) $743
C) $38
D) $944
71) 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.
Sales volume (units) 6,000 7,000
Cost of sales $ 497,400 $ 580,300
Selling and administrative costs $ 273,600 $ 294,700
The best estimate of the total monthly fixed cost is: (Round your intermediate calculations to
2 decimal places.)
A) $875,000
B) $147,000
C) $771,000
D) $823,000
72) 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.
Sales volume (units) 6,000 7,000
Cost of sales $ 497,400 $ 580,300
Selling and administrative costs $ 273,600 $ 294,700
The best estimate of the total variable cost per unit is: (Round your intermediate calculations
to 2 decimal places.)
A) $82.90
B) $128.50
C) $104.00
D) $125.00
Version 1 36
73) 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.
Sales volume (units) 6,000 7,000
Cost of sales $ 497,400 $ 580,300
Selling and administrative costs $ 273,600 $ 294,700
The best estimate of the total contribution margin when 6,300 units are sold is: (Round your
intermediate calculations to 2 decimal places.)
A) $75,600
B) $97,650
C) $362,880
D) $229,950
74) 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:
Machine-Hours Overhead Cost
January 150,000 $ 339,000
February 140,000 $ 328,000
March 160,000 $ 350,000
April 130,000 $ 319,500
May 170,000 $ 362,500
June 200,000 $ 400,000
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? (Round your intermediate calculations to 2
decimal places.)
A) $212,750
B) $359,750
C) $382,750
D) $381,700
Version 1 37
75) 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:
Machine-Hours Overhead Cost
January 150,000 $ 339,000
February 140,000 $ 328,000
March 160,000 $ 350,000
April 130,000 $ 319,500
May 170,000 $ 362,500
June 200,000 $ 400,000
Assume that the relevant range includes all of the activity levels mentioned in this problem.
What is Casablanca’s independent variable?
A) the year
B) the machine hours
C) the total overhead cost
D) the relevant range
76) Hiss Corporation’s activity for the last six months is as follows:
Machine Hours Electrical Cost
July 2,000 $ 1,560
August 3,000 $ 2,230
September 2,400 $ 1,750
October 1,900 $ 1,520
November 1,800 $ 1,450
December 2,100 $ 1,600
Using the high-low method of analysis, the estimated variable cost per machine hour for
electricity is closest to:
A) $0.40
B) $0.65
C) $0.70
D) $0.67
77) Hiss Corporation’s activity for the last six months is as follows:
Machine Hours Electrical Cost
July 2,000 $ 1,560
Version 1 38
August 3,000 $ 2,230
September 2,400 $ 1,750
October 1,900 $ 1,520
November 1,800 $ 1,450
December 2,100 $ 1,600
Using the high-low method of analysis, the estimated fixed cost per month for electricity is
closest to: (Round your intermediate calculations to 2 decimal places.)
A) $260
B) $235
C) $280
D) $800
78) Jorgenson Corporation has provided the following data for the first five months of the
year:
Machine Hours Lubrication Cost
January 240 $ 1,500
February 320 $ 1,600
March 400 $ 1,740
April 300 $ 1,580
May 340 $ 1,680
Using the high-low method of analysis, the estimated variable lubrication cost per machine hour
is closest to:
A) $1.50
B) $1.25
C) $0.67
D) $1.40
79) Jorgenson Corporation has provided the following data for the first five months of the
year:
Machine Hours Lubrication Cost
January 240 $ 1,500
February 320 $ 1,600
March 400 $ 1,740
April 300 $ 1,580
May 340 $ 1,680
Version 1 39
Using the high-low method of analysis, the estimated monthly fixed component of lubrication
cost is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $1,120
B) $1,140
C) $1,170
D) $1,130
80) Jorgenson Corporation has provided the following data for the first five months of the
year:
Machine Hours Lubrication Cost
January 260 $ 1,545
February 335 $ 1,615
March 425 $ 1,745
April 320 $ 1,615
May 390 $ 1,700
Using the least-squares regression method of analysis, the estimated variable lubrication cost per
machine hour is closest to:
A) $.99
B) $1.44
C) $1.22
D) $1.61
81) Jorgenson Corporation has provided the following data for the first five months of the
year:
Machine Hours Lubrication Cost
January 240 $ 1,500
February 320 $ 1,600
March 400 $ 1,740
April 300 $ 1,580
May 340 $ 1,680
Using the least-squares regression method of analysis, the estimated variable lubrication cost per
machine hour is closest to:
Version 1 40
A) $0.80
B) $1.56
C) $1.40
D) $1.28
82) Jorgenson Corporation has provided the following data for the first five months of the
year:
Machine Hours Lubrication Cost
January 240 $ 1,500
February 320 $ 1,600
March 400 $ 1,740
April 300 $ 1,580
May 340 $ 1,680
Using the least-squares regression method of analysis, the estimated monthly fixed component of
lubrication cost is closest to:
A) $1,050
B) $1,060
C) $1,121
D) $1,144
83) Lacourse Incorporated’s inspection costs are listed below:
Units Produced Inspection Costs
January 439 $ 6,148
February 389 $ 5,648
March 458 $ 6,363
April 473 $ 6,501
May 415 $ 5,898
June 390 $ 5,651
July 465 $ 6,428
August 416 $ 5,911
Management believes that inspection cost is a mixed cost that depends on units produced.
Using the least-squares regression method, the estimate of the variable component of
inspection cost per unit produced is closest to:
Version 1 41
A) $9.61
B) $10.22
C) $10.32
D) $15.19
84) Lacourse Incorporated’s inspection costs are listed below:
Units Produced Inspection Costs
January 647 $ 15,309
February 724 $ 15,965
March 694 $ 15,715
April 645 $ 15,271
May 696 $ 15,745
June 665 $ 15,442
July 718 $ 15,933
August 699 $ 15,739
Management believes that inspection cost is a mixed cost that depends on units produced.
Using the least-squares regression method, the estimate of the variable component of
inspection cost per unit produced is closest to:
A) $22.80
B) $8.82
C) $8.27
D) $8.78
85) Lacourse Incorporated’s inspection costs are listed below:
Units Produced Inspection Costs
January 428 $ 6,126
February 378 $ 5,637
March 447 $ 6,341
April 462 $ 6,479
May 404 $ 5,887
June 379 $ 5,640
July 454 $ 6,406
August 405 $ 5,900
Version 1 42
Management believes that inspection cost is a mixed cost that depends on units produced.
Using the least-squares regression method, the estimate of the fixed component of inspection
cost per month is closest to:
A) $5,637
B) $5,842
C) $1,830
D) $1,788
86) Lacourse Incorporated’s inspection costs are listed below:
Units Produced Inspection Costs
January 647 $ 15,309
February 724 $ 15,965
March 694 $ 15,715
April 645 $ 15,271
May 696 $ 15,745
June 665 $ 15,442
July 718 $ 15,933
August 699 $ 15,739
Management believes that inspection cost is a mixed cost that depends on units produced.
Using the least-squares regression method, the estimate of the fixed component of inspection
cost per month is closest to:
A) $9,608
B) $15,640
C) $9,587
D) $15,271
87) Recent maintenance costs of Divers Corporation are listed below:
Machine-Hours Maintenance Costs
February 527 $ 5,144
March 499 $ 5,033
April 542 $ 5,220
May 541 $ 5,196
June 489 $ 4,973
July 543 $ 5,200
August 558 $ 5,288
Version 1 43
September 513 $ 5,060
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:
A) $9.76
B) $6.00
C) $4.43
D) $4.57
88) Recent maintenance costs of Divers Corporation are listed below:
Machine-Hours Maintenance Costs
February 527 $ 5,144
March 499 $ 5,033
April 542 $ 5,220
May 541 $ 5,196
June 489 $ 4,973
July 543 $ 5,200
August 558 $ 5,288
September 513 $ 5,060
Management believes that maintenance cost is a mixed cost that depends on machine-hours.
Using the least-squares regression method, the estimate of the fixed component of maintenance
cost per month is closest to:
A) $5,139
B) $2,806
C) $4,973
D) $2,738
89) The engineering approach to the analysis of mixed costs involves a detailed statistical
analysis of cost behavior using methods that minimize the squared errors.
⊚ true
⊚ false
Version 1 44
90) A major advantage of the high-low method of cost estimation is that it omits all data from
the analysis other than the lowest and highest costs.
⊚ true
⊚ false
91) The highest and lowest costs are always used to analyze a mixed cost under the high-low
method.
⊚ true
⊚ false
92) The high and low points used in the high-low method tend to be unusual and therefore the
cost formula for the mixed cost may not accurately represent all of the data.
⊚ true
⊚ false
93) In a scattergraph of cost and activity, activity is the independent variable because it
causes variations in the cost.
⊚ true
⊚ false
94) Managers can use a variety of methods to estimate the fixed and variable components of
a mixed cost. In account analysis, an account is classified as either variable or fixed based on the
analyst’s prior knowledge of how the cost in the account behaves.
⊚ true
⊚ false
Version 1 45
95) The least-squares regression method computes the regression line that minimizes the sum
of the squared deviations from the plotted points to the line.
⊚ true
⊚ false
96) The R 2 (i.e., R-squared) tells us the percentage of the variation in the dependent
variable (cost) that is explained by variation in the independent variable (activity).
⊚ true
⊚ false
97) The R 2 (i.e., R-squared) varies from 0% to 100%, and the lower the percentage, the
better the fit of the data to a straight line.
⊚ true
⊚ false
98) A quick look at a scattergraph of cost versus activity can reveal that there is little relation
between the cost and the activity or that the relation is something other than a simple straight
line. In such cases, least square regression is highly recommended for estimating fixed and
variable costs.
⊚ true
⊚ false
99) Least-squares regression selects the values for the intercept and slope of a straight line
that minimize the sum of the errors.
⊚ true
⊚ false
Version 1 46
Version 1 47
Answer Key
Test name: chapter 5A
Version 1 48
Version 1 49
Version 1 50