Chpt 6 all - 1 A review of Parry Corporation's accounting...

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1. A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed cost per unit amounted to $8 and $4, respectively. On the basis of this information, what amount of total cost would Parry anticipate at a volume of 85,000 units? B. $1,040,000. 2. Song, Inc., uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40. On the basis of this information, the variable cost per machine hour was: A. $8.40. 3. Northridge, Inc., uses the high-low method to analyze cost behavior. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged $10.50 per hour. When activity jumped to 24,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $9.75. On the basis of this information, the company's fixed maintenance costs were: B. $90,000. 4. The following data relate to the Lyle Company for May and August of the current year: May and August were the lowest and highest activity levels, and Lyle uses the high-low method to analyze cost behavior. Which of the following statements is true? D. The fixed maintenance cost is $725,000 per month. 5. Viscount Corporation has a machining capacity of 200,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:
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Viscount uses the high-low method to analyze cost behavior. Required: A. Classify each of the costs as being either variable, fixed, or semivariable. B. Calculate amounts for the two unknowns in the preceding table. C. Calculate the total amount that Viscount would expect at a 75% utilization rate for Cost A, Cost B, and Cost C. D. Develop an equation that Viscount can use to predict total cost for any level of hours within its range of operation. A. Cost A: Fixed (same total amount at each level of activity) Cost B: Variable (constant per-hour figures) Cost C: Semivariable (changing total and per-hour figures) B. Cost A: $440,000 (200,000 hours 90%) = $2.44 Cost B: (200,000 hours 40%) $10.80 = $864,000 C. Analysis of Cost C (variable portion): ($1,330,000 - $680,000) [(200,000 90%) - (200,000 40%)] = $6.50 per hour D. Variable cost per hour: $10.80 + $6.50 = $17.30
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Fixed cost: $440,000 + $160,000 = $600,000 Equation: Y = $600,000 + $17.30X where Y = total cost and X = number of hours 6. The following selected data were taken from the accounting records of Shook Industrial Manufacturing: July's costs consisted of machine supplies ($170,000), property taxes ($24,000), and plant maintenance ($1,080,000). These costs exhibit the following respective behavior:
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This note was uploaded on 08/10/2011 for the course ECON 123 taught by Professor Other during the Spring '11 term at Pontificia Universidad Catolica Madre y Maestra.

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Chpt 6 all - 1 A review of Parry Corporation's accounting...

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