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Exam 13: Analyzing Mixed Costs

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Question 41

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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 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

E) B) and D)
F) All of the above

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Question 42

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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 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

E) All of the above
F) A) and C)

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Question 43

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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.

Lacourse Inc.'s inspection costs are listed below: 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:

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: (Round your intermediate calculations to 2 decimal places.)

Wuensch Inc., an escrow agent, has provided the following data concerning its office expenses: 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:

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: $\begin{array}{lcc} & \text { At } 8,000 & \text { At } 10,000 \\& \text { T-shirts } & \text { T-shirts } \\\text { T-shirt cost } & \$ 48,000 & \$ 60,000 \\\text { Rent cost } & \$ 3,600 & \$ 3,600 \\\text { Utilities cost } & \$ 6,800& \$ 8,300\end{array}$ 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.

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:

The management of Hamano Corporation would like for you to analyze their repair costs, which are listed below: $\begin{array}{lcc} & \begin{array}{c}\text { Machine- } \\\text { Hours }\end{array} & \begin{array}{c}\text { Repair } \\\text { Costs }\end{array} \\\text { April } & 4,459 & \$ 98,523 \\\text { May } & 4,426 & \$ 98,296 \\\text { June } & 4,493 & \$ 98,781 \\\text { July } & 4,417 & \$ 98,207 \\\text { August } & 4,432 & \$ 98,349 \\\text { September } & 4,446 & \$ 98,420 \\\text { October } & 4,489 & \$ 98,749 \\\text { November } & 4,475 & \$ 98,654\end{array}$ 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:

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: (Round your intermediate calculations to 2 decimal places.)

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. Required: Using the least-squares regression method, estimate the cost formula for this cost.

Seifer Inc.'s inspection costs are listed below: 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:

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.

Utility costs at one of Hannemann Corporation's factories are listed below: 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. Show your work!

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: (Round your intermediate calculations to 2 decimal places.)

Jorgenson Corporation has provided the following data for the first five months of the year: Using the least-squares regression method of analysis, the estimated variable lubrication cost per machine hour is closest to:

The highest and lowest costs are always used to analyze a mixed cost under the high-low method.

Compton Corporation is a wholesale distributor of educational CD-ROMs. The company's records indicate the following: What is the company's contribution margin for this year? (Round your intermediate calculations to 2 decimal places.)

In a scattergraph of cost and activity, activity is the independent variable because it causes variations in the cost.

The R² (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).