CH5 - 1. Maxwell Company has a total expense per unit of...

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1. Maxwell Company has a total expense per unit of $2.00 per unit at the 16,000 level of activity and total expense per unit of $1.95 at the 21,000 unit level of activity. The best estimate of the total fixed cost per period for Maxwell Company is: A) $40,950 B) $32,000 C) $3,360 D) $29,190 Feedback: To calculate the variable manufacturing cost per unit: Variable manufacturing overhead cost = Change in cost Change in activity = ($40,950 - $32,000) (21,000 - 16,000) = $1.79 Fixed cost element of manufacturing overhead = Total cost - Variable cost element = $40,950 - ($1.79 x 21,000) = $3,360 2. The linear equation Y = a + bX is often used to express cost formulas. In this equation: A) the b term represents variable cost per unit of activity. B) the a term represents variable cost in total. C) the X term represents total cost. D) the Y term represents total fixed cost. 3. Bell Company has provided the following data for maintenance costs: Using the high-low method, the cost formula for maintenance cost would be: A) $2.00 per machine hour B) $1.625 per machine hour C) $18,000 plus $0.50 per machine hour D) $24,000 plus $0.50 per machine hour Feedback: Variable cost = Change in cost Change in activity = ($26,000 - $24,000) (16,000 - 12,000) = $0.50 Fixed cost element = Total cost - Variable cost element = $26,000 - ($0.50 x 16,000) = $18,000 Therefore, the cost formula for total maintenance cost is $18,000 per period plus $0.50 per machine-hour, or Y = $18,000 + $0.50X.
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4. The management of Harper Corporation, a manufacturing company, has provided the following financial data for December: The contribution margin for December was: A) $204,000 B) $64,000 C) $340,000 D) $319,000 5. _________________ is a method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors. A) quick and dirty method B) scattergraph method C) high-low method D) least-square regression method 6. An example of a discretionary fixed cost is: A) insurance. B) taxes on real estate. C) management training. D) depreciation of buildings and equipment. 7. Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the last five months of operations.
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Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to: A) $1,306.50 B) $870.00 C) $1,290.00 D) $1,150.00 Feedback: Variable cost = Change in cost Change in activity = ($1,950 - $1,510) (2,000 - 900) = $0.40 Fixed cost element = Total cost - Variable cost element = $1,950 - ($0.40 x 2,000) = $1,150 8. Rymore Company would like to classify the following costs according to their cost behavior: Which of the following classifications best describes the behavior of Cost B? A) Mixed
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CH5 - 1. Maxwell Company has a total expense per unit of...

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