Cost Behavior Full Test Bank Ch.5 4th Edition

Managerial Accounting, 4e (Whitecotton)

Chapter 5 Cost Behavior

1) A variable cost increases in total as the volume increases.

2) A fixed cost will stay constant on a per unit basis as the volume increases.

3) Step costs are fixed over some range of activity and then increase like a variable cost.

4) A scattergraph is useful in recognizing unusual patterns in the cost data.

5) The high-low method requires three observations of costs to calculate the cost formula.

6) The least-squares regression method uses all of the available data to find the best fitting line.

7) R-square tells managers how much of the variability in activity is caused by variability in cost.

8) Contribution margin is defined as sales revenue less variable costs.

9) The contribution margin income statement is appropriate for external users.

10) Contribution margin plus variable cost per unit equals total sales revenue.

11) The unit contribution margin tells how much each additional unit sold will contribute to covering variable costs.

12) The contribution margin ratio is calculated as total contribution margin divided by total sales revenue.

13) Variable costing uses a contribution margin income statement.

14) Firms may choose to use absorption costing or variable costing for external financial reporting purposes.

15) Full absorption costing divides fixed overhead between Cost of Goods Sold and period expenses.

16) Cost behavior is:

A) the way in which costs change when the activity level changes.

B) the difference between sales revenue and fixed costs.

C) the same as absorption costing.

D) the amount of sales necessary to achieve a specific profit.

17) A cost driver:

A) is the same as a fixed cost.

B) is an activity that causes total costs to change.

C) is the same as margin of safety.

D) is a method of calculating mixed costs.

18) The relevant range is:

A) the range in which costs remain variable.

B) the range of activity over which we expect our assumptions about cost behavior to hold true.

C) the range of activity based on the volume-based cost driver.

D) the range in which costs remain fixed.

19) A company's normal operating activity is to produce 500 units per month. During its first two months of operations, it produced 100 units per month. Following a great article about the product, product sales spiked to 1,000 units per month, but the spike only lasted for one month. Which of the following best approximates the company's relevant range?

A) 450 - 510 units

B) 100 - 1,000 units

C) 500 - 1,000 units

D) 100, 500, or 1,000 units

20) Which of the following statements is correct about relevant range?

A) The relevant range only applies to fixed costs in the context of "step costs."

B) The relevant range determines production levels for the company.

C) The relevant range helps managers make decisions based on normal operations, but the relevant range is not prescriptive beyond the range.

D) The relevant range is useful for operations managers, but not necessarily for cost managers within a production facility.

21) A cost that changes, in total, in direct proportion to changes in activity levels is a(n):

A) absorption cost.

B) contribution margin.

C) fixed cost.

D) variable cost.

22) All else being equal, if sales revenue doubles, variable costs will:

A) decrease in total.

B) increase in total.

C) decrease on a per unit basis.

D) increase on a per unit basis.

23) When Carter, Inc. sells 48,000 units, its total variable cost is $115,200. What is its total variable cost when it sells 54,000 units?

A) $100,800

B) $115,200

C) $129,600

D) $134,800

24) Which of the following is a variable cost?

A) A cost that is $26,000 when production is 65,000, and $26,000 when production is 91,000.

B) A cost that is $26,000 when production is 65,000, and $36,400 when production is 91,000.

C) A cost that is $26,000 when production is 65,000, and $52,000 when production is 91,000.

D) A cost that is $52,000 when production is 65,000, and $52,000 when production is 91,000.

25) Which of the following statements is true?

A) Fixed costs are constant on a per unit basis.

B) Variable costs per unit decrease as activity volume increases.

C) Variable costs are constant in total dollars.

D) Fixed costs are constant in total dollars.

26) A cost that remains the same, in total, regardless of changes in activity level is a:

A) variable cost.

B) fixed cost.

C) mixed cost.

D) step cost.

27) All else being equal, if sales revenue doubles, fixed costs will:

A) decrease in total.

B) increase in total.

C) decrease on a per unit basis.

D) increase on a per unit basis.

28) When Greenway, Inc. sells 48,000 units, its total fixed cost is $115,200. What is its total fixed cost when it sells 54,000 units?

A) $100,800

B) $115,200

C) $129,600

D) $134,800

29) Which of the following is a fixed cost?

A) A cost that is $28.00 per unit when production is 70,000, and $28.00 per unit when production is 112,000.

B) A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit when production is 112,000.

C) A cost that is $28.00 per unit when production is 70,000, and $56.00 per unit when production is 112,000.

D) A cost that is $56.00 per unit when production is 70,000, and $56.00 per unit when production is 112,000.

30) A step cost:

A) is a fixed cost over the relevant range and a variable cost everywhere else.

B) contains both fixed and variable components.

C) increases in direct proportion to changes in activity.

D) is fixed over some range of activity.

31) Stella, Inc. must perform maintenance on its production machinery after every 10,000 units produced. Production varies between 12,000 and 30,000 units a year. The cost of this maintenance would be classified as a

A) variable cost.

B) fixed cost.

C) step cost.

D) mixed cost.

32) A mixed cost has:

A) either fixed or variable cost components, but not both.

B) only variable cost components, both within and outside of the relevant range.

C) only fixed cost components, both within and outside of the relevant range.

D) both fixed and variable cost components.

33) A mixed cost:

A) is fixed over a wider range of activity than a step cost.

B) is a fixed cost over the relevant range and a variable cost everywhere else.

C) contains both fixed and variable components.

D) always increases on a per unit basis.

34) Mohave, Inc. produces approximately 4,000 units per month, and it places a quality assurance logo on each of its units. To use this logo, it must pay the quality assurance firm $5,000 per month plus $1 per unit. The cost to Mohave of using the quality assurance logo would be a:

A) fixed cost.

B) mixed cost.

C) variable cost.

D) step cost.

35) Which of the following is a mixed cost?

A) A cost that is $32.00 per unit when production is 80,000, and $32.00 per unit when production is 128,000.

B) A cost that is $32.00 per unit when production is 80,000, and $40.00 per unit when production is 128,000.

C) A cost that is $32.00 per unit when production is 80,000, and $26.00 per unit when production is 128,000.

D) A cost that is $64.00 per unit when production is 80,000, and $64.00 per unit when production is 128,000.

36) Onini, Inc. produces one product with two production levels: 20,000 units and 80,000 units. At each production level, Onini's per-unit costs for Costs A, B, and C are:

What type of cost is each?

A) Cost A is fixed, Cost B is mixed, and Cost C is variable.

B) Cost A is fixed, Cost B is variable, and Cost C is mixed.

C) Cost A is variable, Cost B is mixed, and Cost C is fixed.

D) Cost A is variable, Cost B is fixed, and Cost C is mixed.

37) The per-unit amount of three different production costs for Thunderbird, Inc., are as follows:

What type of cost is each?

A) Cost A is fixed, Cost B is mixed, Cost C is variable.

B) Cost A is fixed, Cost B is variable, Cost C is mixed.

C) Cost A is variable, Cost B is mixed, Cost C is fixed.

D) Cost A is variable, Cost B is fixed, Cost C is mixed.

38) Which of the following is the correct equation for total mixed costs under the linearity assumption?

A) Total Fixed Costs + (Variable Cost per Unit × Units of Activity)

B) Total Variable Costs + (Fixed Cost per Unit × Units of Activity)

C) (Total Fixed Costs × Units of Activity) + Total Variable Costs

D) (Total Fixed Costs × Units of Activity) + (Total Variable Costs × Units of Activity)

39) The linearity assumption is:

A) the assumption that the relationship between fixed costs and variable costs can be approximated by a straight line.

B) the assumption that the relationship between fixed costs and variable costs can be approximated by a curved line.

C) realistic in all costing situations.

D) the assumption that total cost depends on activity level.

40) A graph that provides a visual representation of the relationship between total cost and activity level is called a:

A) relevant range.

B) scattergraph.

C) contribution margin graph.

D) dependent variable.

41) A scattergraph is a graph with:

A) total cost plotted on the vertical axis and activity on the horizontal axis.

B) activity plotted on the vertical axis and contribution margin on the horizontal axis.

C) contribution margin plotted on the vertical axis and sales revenues on the horizontal axis.

D) the vertical axis measured in units and the horizontal axis measured in dollars.

42) The slope of the cost line on a scattergraph represents:

A) fixed cost per unit.

B) total fixed cost.

C) variable cost per unit.

D) sales price per unit.

43) The y-intercept of the cost line on a scattergraph represents:

A) fixed cost per unit.

B) total fixed cost.

C) variable cost per unit.

D) sales price per unit.

44) If a scattergraph contains points that do not fall in a perfect line:

A) the relationship between the variables is not good enough to warrant fitting a line to the data.

B) this is an indication that there is no relationship whatsoever between the variables.

C) the visual fit method and high-low methods should not be used, but least-squares regression can be used.

D) a straight line can still be used to approximate the relationship if a general linear trend can be discerned.

45) The cost estimating approach that involves "eye-balling" the closest fitting line to the data is the:

A) scattergraph method.

B) high-low method.

C) visual fit method.

D) regression analysis.

46) Which of the following is true about the visual fit method?

A) The visual fit method is the most objective way to fit a line to cost data using a scattergraph.

B) Although a scattergraph can be created by hand, the visual fit method of determining total fixed costs and variable costs per unit must be completed by computer.

C) Assuming the relationship between total cost and activity is (mostly) linear the visual fit method is an approximation of total fixed costs and variable costs per unit.

D) If the scattergraph shows there is not a linear relationship between total costs and activity, the visual fit method can give a close approximation of total fixed costs and variable costs per unit.

47) The cost estimating approach that uses the two most extreme activity observations is the:

A) scattergraph method.

B) high-low method.

C) visual fit method.

D) regression analysis.

48) The high-low method provides a reasonable estimate of the fixed and variable costs as long as:

A) it uses eight or more points (instead of simply two).

B) at least one of the two points falls within the relevant range.

C) the high and low points for both activity and total fixed costs are the same.

D) the high and low points reflect the general trend of the data.

49) Georgia uses the high-low method of estimating costs. Georgia had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $78,000. Georgia would estimate variable cost per unit as:

A) $14.00

B) $9.10

C) $5.60

D) $10.54

50) Elm uses the high-low method of estimating costs. Elm had total costs of $250,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $390,000. Elm would estimate variable cost per unit as:

A) $70.00

B) $45.50

C) $28.00

D) $52.71

51) Cardinal uses the high-low method of estimating costs. Cardinal had total costs of $25,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $39,000. Cardinal would estimate variable cost per unit as:

A) $7.00

B) $4.55

C) $2.80

D) $5.26

52) Sparrow, Inc. used the high-low method to estimate that its fixed costs are $105,000. At its low level of activity, 50,000 units, average cost was $2.60 per unit. What would Sparrow predict as its variable cost per unit?

A) $0.50

B) $1.55

C) $2.10

D) $2.60

53) The high-low method is a cost estimating approach that uses ________ to find the cost line.

A) only two data points

B) all available data points

C) only four data points

D) personal intuition

54) Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. Ajax would estimate fixed costs as:

A) $28,000

B) $30,000

C) $64,000

D) $128,000

55) Meadow uses the high-low method. It had total costs of $500,000 at its lowest level of activity when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $780,000. Meadow would estimate fixed costs as:

A) $280,000

B) $300,000

C) $640,000

D) $1,200,000

56) Lark, which uses the high-low method, had total costs of $25,000 at its lowest level of activity when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $39,000. Lark would estimate fixed costs as:

A) $14,000

B) $15,000

C) $32,000

D) $60,000

57) Holly Co. uses the high-low method. It had an average cost per unit of $10 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $6.50 at its highest level of activity when sales equaled 20,000 units. Holly would estimate fixed costs as:

A) $70,000

B) $16.50

C) $8.25

D) $100,000

58) Palm, which uses the high-low method, had an average cost per unit of $50 at its lowest level of activity when sales equaled 1,000 units and an average cost per unit of $32.50 at its highest level of activity when sales equaled 2,000 units. Palm would estimate fixed costs as:

A) $30.00

B) $82.50

C) $17,500

D) $35,000

59) Cypress, which uses the high-low method, had an average cost per unit of $5 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $3.25 at its highest level of activity when sales equaled 24,000 units. Cypress would estimate fixed costs as:

A) $30,000

B) $6.25

C) $1.75

D) $50,000

60) Carson, which uses the high-low method, reported total costs of $24 per unit at its lowest activity level, when production equaled 10,000 units. When production doubled, at its highest activity level, the total cost per unit dropped to $15. Carson would estimate variable cost per unit as:

A) $9.00

B) $6.00

C) $11.00

D) ($9.00)

61) Carson, which uses the high-low method of estimating costs, reported total costs of $24 per unit when production was at its lowest level, at 10,000 units. When production doubled to its highest level, the total cost per unit dropped to $15. Carson would estimate its total fixed cost as:

A) $9

B) $33

C) $180,000

D) $585,000

62) Fremont, which uses the high-low method, reported total costs of $10 per unit at its lowest production level, 5,000 units. When production tripled to its highest level, the total cost per unit dropped to $5. Fremont would estimate its variable cost per unit as:

A) $2.50

B) $5.00

C) $15.00

D) ($5.00)

63) Fremont, which uses the high-low method, reported total costs of $10 per unit at its lowest production level, 5,000 units. When production tripled to its highest level, the total cost per unit dropped to $5. Fremont would estimate its total fixed cost as:

A) $5

B) $15

C) $50,000

D) $37,500

64) McNeil uses the high-low method of estimating costs. McNeil had total costs of $50,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units, total costs were $78,000. What would McNeil estimate its total cost to be if sales equaled 8,000 units?

A) $32,000

B) $52,000

C) $62,000

D) $80,000

65) Winston uses the high-low method. It had an average cost per unit of $10 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $6.50 at its highest level of activity when sales equaled 20,000 units. What would Winston estimate its total cost to be if sales equaled 8,000 units?

A) $24,000

B) $52,000

C) $70,000

D) $94,000

66) Citrus, Inc. used the high-low method to estimate that its fixed costs are $210,000. At its low level of activity, 100,000 units, average cost was $2.60 per unit. What would Citrus predict its average cost per unit to be when production is 200,000 units?

A) $1.05

B) $1.55

C) $2.60

D) $5.20

67) Which of the following statements is correct about the high-low method?

A) The high-low method is complicated to apply.

B) The high-low method is effective for periods in which activity is particularly high or low.

C) Generally, managers can obtain more accurate information from other methods of cost analysis that use a larger number of data points.

D) Generally, managers use the high-low method because it has no drawbacks or limitations.

68) A statistical method for finding the best-fitting cost equation to a set of data is the:

A) scattergraph method.

B) high-low method.

C) visual fit method.

D) least-squares regression method.

69) Regression analysis is a cost-estimating approach that uses ________ to find the cost line.

A) only two data points

B) all available data points

C) only four data points

D) personal intuition

70) We generally need ________ data points to get reliable regression results using the least-squares regression method.

A) at least 20

B) six to eight

C) as many as possible

D) only two

71) Which of the following is not correct about "R Square" in regression analysis?

A) R Square is a measure of "goodness of fit" of the model.

B) An R Square value of 1.0 indicates a perfect fit of the model.

C) R Square explains how much of the variability in x is explained by y.

D) R Square explains how much of the variability in y is explained by x.

72) Using the results of the least-squares regression analysis, which value estimates total fixed costs?

A) R Square

B) Intercept

C) X Value

D) Multiple R

73) Using the results of the least-squares regression analysis, which value estimates variable cost per unit?

A) R Square

B) Intercept

C) X Value

D) Multiple R

74) Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:

What is Star's variable cost per unit?

A) $0.92

B) $2.84

C) $11.57

D) $12.55

75) Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:

What is Star's total fixed cost? 

A) $61,603

B) $92,130

C) $175,003

D) $236,606

76) Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:

What is Star's formula for estimating costs? 

A) Total cost = $175,003 + ($11.57 × Production)

B) Total cost = $61,603 + ($0.92 × Production)

C) Total cost = $175,003 + ($61,603 × Production)

D) Total cost = $11.57 + ($0.9213 × Production)

77) Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:

How much of the variation in cost is explained by production?

A) It is impossible to determine.

B) 92.13%

C) 95.17%

D) 97.55%

78) Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:

How much of the variation in cost is not explained by production?

A) It is impossible to determine.

B) 4.83%

C) 7.87%

D) 2.45%

79) Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:

What total cost would Star predict for a month in which production is 2,000 units?

A) $23,140

B) $63,446

C) $175,003

D) $198,143

80) Total contribution margin is defined as:

A) selling price times units sold.

B) cost to produce times units sold.

C) total sales revenues less total variable costs.

D) total variable costs less fixed costs.

81) Total contribution margin is equal to:

A) total sales less fixed costs.

B) fixed costs plus net operating income.

C) variable costs plus net operating income.

D) total sales less net operating income.

82) Orchid Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $25,000. If Orchid sells 13,000 units, contribution margin will equal:

A) $195,000

B) $145,000

C) $40,000

D) $65,000

83) Jasmine Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $25,000. Contribution margin is $85,000. How many units did Jasmine sell?

A) 7,000

B) 10,000

C) 13,000

D) 17,000

84) Gardenia Corp. has a selling price of $15, fixed costs of $25,000, and contribution margin of $65,000. If Gardenia sells 13,000 units, how much are variable costs per unit?

A) $2.00

B) $5.00

C) $7.00

D) $10.00

85) Rose Corp. has contribution margin of $65,000, variable costs of $10 per unit, and fixed costs of $25,000. If Rose sells 13,000 units, what was the selling price per unit?

A) $5.00

B) $12.50

C) $15.00

D) $17.08

86) Fixed costs are expressed ________ because that is the amount of cost that is truly fixed.

A) on a per unit basis

B) in total

C) on a per unit basis within the relevant range

D) as a percentage of sales

87) The unit contribution margin:

A) equals total sales revenue minus total variable costs.

B) equals total contribution margin times total units.

C) tells us how much each additional unit sold above the break-even point will contribute to profit.

D) equals overall profit per unit.

88) Maple Corp. has a selling price of $20, variable costs of $15 per unit, and fixed costs of $25,000. Maple expects profit of $300,000 at its anticipated level of production. What is Maple's unit contribution margin?

A) $5.00

B) $10.00

C) $27.50

D) $20.00

89) Sugar Corp. has a selling price of $20, variable costs of $12 per unit, and fixed costs of $25,000. Maple expects profit of $300,000 at its anticipated level of production. If Sugar sells 5,000 units more than expected, how much higher will its profits be?

A) $40,000

B) $100,000

C) $60,000

D) $300,000

90) Kent Corp. has fixed costs of $25,000. Kent expects net operating income of $300,000 at its anticipated level of production, 65,000 units. What is Kent's unit contribution margin?

A) $5.00

B) $10.00

C) $27.50

D) $20.00

91) A grocery store wants to encourage its customers to bring their own shopping bags, thus saving the store money on purchasing plastic or paper bags and saving the environment in the process. For an Earth Day promotion, the store gives away free canvas bags and engages in a substantial advertising campaign to highlight the initiative. Then, the store rewards customers who bring their own bags with a 5% discount on all future shopping trips. Which of the following is not a way this initiative might be reflected in the grocery store's contribution margin income statement?

A) It wouldn't be. Contribution margin income statements do not currently support sustainability accounting.

B) The store's fixed costs would increase to account for the promotional materials and the fixed costs of providing free bags to customers.

C) The store's sales revenue would decrease to reflect the discounts given to customers who bring their own bags.

D) The store's variable costs would decrease to reflect the reduced cost of providing paper or plastic bags to all customers.

92) The contribution margin ratio is:

A) the contribution margin stated as a percentage of sales.

B) the contribution margin stated as a percentage of profit.

C) the contribution margin stated as a percentage of total costs.

D) the contribution margin stated as a percentage of fixed costs.

93) The contribution margin ratio is:

A) the difference between sales revenue and variable costs.

B) the difference between variable costs and fixed costs.

C) variable costs divided by fixed costs.

D) contribution margin per unit divided by sales price per unit.

94) Knox Corp. has a selling price of $20, variable costs of $14 per unit, and fixed costs of $25,000. If Knox sells 12,000 units, the contribution margin ratio will equal:

A) $60,000

B) 30%

C) 70%

D) 10.4%

95) Booble, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. How much are Booble's fixed costs?

A) $18,000

B) $45,000

C) $50,000

D) $90,000

96) Laredo, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase?

A) $1,800

B) $4,500

C) $5,000

D) $9,000

97) Rodeo, Inc. has a contribution margin ratio of 45%. This month, profit was $40,000 and fixed costs were $50,000. How much was Laredo's sales revenue?

A) $40,500

B) $90,000

C) $111,111

D) $200,000

98) What is the difference between full absorption costing and variable costing?

A) In full absorption costing, all of the non-manufacturing costs are expensed. In variable costing, all of the non-manufacturing expenses are included in the cost of the product.

B) In full absorption costing, fixed manufacturing overhead is expensed. In variable costing, fixed manufacturing overhead is included in the cost of the product.

C) In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.

D) Variable costing must be used for external financial reports while full absorption costing can only be used for internal reporting.

99) Profit will be the same under variable costing as under full absorption costing whenever:

A) the number of units produced is greater than the number of units sold.

B) the number of units produced is the same as the number of units sold.

C) the number of units produced is less than the number of units sold.

D) variable costing is chosen for external reporting purposes.

100) The difference between variable costing and full absorption costing is due to differences in the treatment of:

A) direct costs.

B) variable manufacturing overhead.

C) fixed manufacturing overhead.

D) period costs.

101) Jasper Enterprises had the following cost and production information for April:

What is Jasper Enterprise's income under absorption costing?

A) $1,400,000

B) $1,460,000

C) $1,745,000

D) $1,785,000

102) Jasper Enterprises had the following cost and production information for April:

What is Jasper Enterprise's income under variable costing?

A) $1,400,000

B) $1,460,000

C) $1,745,000

D) $1,785,000

103) Jasper Enterprises had the following cost and production information for April:

How much greater will Jasper Enterprises' income be under absorption costing than under variable costing?

A) $60,000

B) $315,000

C) $340,000

D) $400,000

104) If the number of units sold is the same every month, the profit from these units will be the same every month if:

A) absorption costing is used.

B) variable costing is used.

C) production is greater than sales.

D) sales is greater than production.

105) If a firm uses absorption costing, which of the following actions taken by management would increase gross profit even if sales do not increase?

A) Decreasing production and using items from inventory for sales.

B) Increasing production and building up inventory.

C) Increasing fixed costs by investing in new production technology.

D) Increasing variable costs by purchasing higher-quality materials.

106) Flint Enterprises had the following cost and production information for April:

Inventory increased by 4,000 units during April. What is Flint Enterprise's income under absorption costing?

A) $1,285,000

B) $1,365,000

C) $1,745,000

D) $1,785,000

107) Flint Enterprises had the following cost and production information for April:

Inventory increased by 4,000 units during April. What is Flint Enterprise's income under variable costing?

A) $1,285,000

B) $1,365,000

C) $1,745,000

D) $1,785,000

108) Flint Enterprises had the following cost and production information for April:

Inventory increased by 4,000 units during April. How much greater will Flint Enterprises' income be under absorption costing than under variable costing?

A) $80,000

B) $16,000

C) $95,000

D) $144,000

109) Flint Enterprises had the following cost and production information for May:

Inventory increased by 2,000 units during May. What is Flint Enterprise's income under variable costing?

A) $4,620,000

B) $4,652,000

C) $5,070,000

D) $5,132,000

110) Flint Enterprises had the following cost and production information for May:

Inventory increased by 2,000 units during May. What is Flint Enterprise's income under absorption costing?

A) $4,620,000

B) $4,652,000

C) $5,070,000

D) $5,132,000

111) Flint Enterprises had the following cost and production information for May:

Inventory increased by 2,000 units during May. How much greater will Flint Enterprises' income be under absorption costing than under variable costing?

A) $16,000

B) $32,000

C) $368,000

D) $400,000

112) Which of the following statements is correct about the difference between contribution margin and gross margin?

A) Contribution margin and gross margin are equivalent.

B) Contribution margin is the difference between sales revenue and cost of goods sold.

C) Gross margin is the difference between sales revenue and variable costs.

D) Gross margin is used for external reporting, while contribution margin is used for internal reporting.

113) Chill Out Novelties sells ice cream bars from a kiosk near campus. Fixed costs are $200 per week and the variable cost is $0.50 per ice cream bar. Complete the following table for the levels of ice cream bars sold per week. Round your answers to two decimal places.

114) Boxwood Company sells wooden boxes from a kiosk in a mall. Fixed costs are $2,500 per month and the variable cost is $2.75 per item. Complete the following table for the levels of units sold.

115) Bayshore, Inc., has collected the following cost data for various levels of activity:     

Using the high-low method, determine the variable cost per client served and the total fixed cost.

116) Harbor Images has collected the following cost data for various levels of activity:

a. Using the high-low method, determine the variable cost per image created and the total fixed cost.

b. Estimate the total costs when 5,500 images are created.

117) Island Enterprises has presented the following information for the past eight months operations:     

a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.

b. What would total costs be for a month with 3,000 units produced?

118) Silver Products has presented the following information for the past eight months operations:     

a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.

b. What would total costs be for a month with 5,000 units produced?

119) Royal Enterprises has presented the following information for the past three months operations:

a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.

b. What would total costs be for a month with 5,000 units produced?

120) Sugarloaf Enterprises has presented the following information for the past three months operations:   

a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.

b. What would total costs be for a month with 3,000 units produced?

121) Bronze Products has presented the following information for the past eight months operations:     

a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.

b. What would total costs be for a month with 5,000 units produced?

122) Sage, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:   

a. What is Sage's total fixed cost?

b. What is Sage's variable cost per unit?

c. What total cost would Sage predict for a month in which they sold 10,000 units?

123) Newport, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:

a. What is Newport's total fixed cost?

b. What is Newport's variable cost per unit?

c. What total cost would Newport predict for a month in which they sold 5,000 units?

d. What proportion of variation in Newport's cost is explained by variation in production?

124) Chilton, Inc. sold 11,000 units last year for $20 each. Variable costs per unit were $4 for direct materials, $1.50 for direct labor, and $2.50 for variable overhead. Fixed costs were $60,000 in manufacturing overhead and $40,000 in nonmanufacturing costs.

a. What is the total contribution margin?

b. What is the unit contribution margin?

c. What is the contribution margin ratio?

d. If sales increase by 2,000 units, by how much will profits increase?

125) Vaughn, Inc. sold 17,000 units last year for $50 each. Variable costs per unit were $15 for direct materials, $15 for direct labor, and $10 for variable overhead. Fixed costs were $10,000 in manufacturing overhead and $50,000 in nonmanufacturing costs.

a. What is the total contribution margin?

b. What is the unit contribution margin?

c. What is the contribution margin ratio?

d. If sales increase by 5,000 units, by how much will profits increase?

126) Campbell, Inc. sold 100,000 units last year for $2.00 each. Variable costs per unit were $0.30 for direct materials, $0.50 for direct labor, and $0.30 for variable overhead. Fixed costs were $60,000 in manufacturing overhead and $40,000 in nonmanufacturing costs.

a. What is the total contribution margin?

b. What is the unit contribution margin?

c. What is the contribution margin ratio?

d. If sales increase by 20,000 units, by how much will profits increase?

127) Acme Company sold 900 units for $110 each. Variable costs were $75 per unit and total fixed expenses were $22,000. Prepare a contribution margin income statement.

128) Laurel Company sold 500 units for $450 each. Variable costs were $280 per unit, and total fixed expenses were $53,000. Prepare a contribution margin income statement.

129) Aspen Inc has the following information for its first year of operations:     

a. Prepare Aspen's full absorption costing income statement.

b. Prepare Aspen's variable costing income statement.

130) Heather Inc has the following information for its first year of operations:

a. Prepare Heather's full absorption costing income statement.

b. Prepare Heather's variable costing income statement.

131) Lavender Inc has the following information for its first year of operations:   

a. Prepare Lavender's full absorption costing income statement.

b. Prepare Lavender's variable costing income statement.

132) Paige Inc has the following information for its first year of operations:  

a. Prepare Paige's full absorption costing income statement.

b. Prepare Paige's variable costing income statement.