LESSON 5
Review material
Review questions
Question 1 — Multiple choice
a.
Upsilon Company operates a cafeteria for its employees. The number of meals served
each week over the last seven weeks, along with the total costs of operating the
cafeteria, are given below:
Week
Meals served
Cafeteria costs
1
1,500
€4,800
2
1,600
5,080
3
1,800
5,280
4
1,450
4,900
5
1,200
4,000
6
1,650
5,100
7
1,900
5,400
Assume that the cafeteria expects to serve 1,850 meals during Week 8. Using the
high-low method, what would be the expected cafeteria costs for Week 8?
1) €4,375
2) €5,180
3) €5,300
4) €5,340
b.
Chang Company has two divisions, True and West. The company’s overall
contribution margin ratio is 40% when combined sales in the two divisions total
€900,000. If variable costs are €200,000 in Division True, and if Division West’s
contribution margin ratio is 20%, what must be the sales in Division West?
1) €200,000
2) €340,000
3) €425,000
4) €700,000
c.
Which of the following statements concerning the high-low method of mixed cost
analysis is true?
1) The high-low method of mixed cost analysis provides the best fit for all of the
data.
2) The high-low method of mixed cost analysis always shows the fixed cost
component of mixed costs to be zero.
3) The high-low method of mixed cost analysis can be influenced by extreme values
or outliers.
4) The cost formula resulting from the high-low method of mixed cost analysis is
based on least squares.
Management Accounting Fundamentals
Review material 5
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