Deck 3: Cost Behaviour

Question 1

You are given the following cost and volume information:
$$\begin{array} { c c } \begin{array} { c } \text { Volume } \\(\text { in units })\end{array} & \begin{array} { c } \text { Total Cost } \\( \text { in \$ })\end{array} \\\hline 200 & \$ 1000 \\400 & 1000 \\600 & 1000\end{array}$$
Which type of cost is given?

A) Variable
B) Fixed
C) Mixed
D) Can not be determined

Answer 1

Fixed

Question 2

As production increases,variable costs per unit ____.

A) increase.
B) decrease.
C) stay the same.
D) can not be predicted.

Answer 2

C

Question 3

As production goes up,total variable costs ____.

A) decrease.
B) increase.
C) stay the same.
D) can not be predicted.

Answer 3

B

Question 4

As production decreases,variable costs per unit ____.

A) increase.
B) decrease.
C) stay the same.
D) can not be predicted.

Question 5

____ are costs that change in total when production volume increases or decreases within the relevant range.

A) Variable costs
B) Facility-level costs
C) Fixed costs
D) Period costs

Question 6

As production increases,fixed costs per unit ____.

A) increase
B) decrease
C) stay the same
D) can not be predicted

Question 7

You are given the following cost and volume information:
$$\begin{array} { c c } \begin{array} { c } \text { Volume } \\(\text { in units } )\end{array} & \begin{array} { c } \text { Cost per unit } \\( \text { in\$ })\end{array} \\\hline 200 & \$ 10 \\400 & 10 \\600 & 10\end{array}$$
Which type of cost is given?

A) Variable
B) Fixed
C) Mixed
D) Can not be determined

Question 8

Which of the following types of costs is the most likely to be classified as variable?

A) Factory rent
B) Factory insurance
C) Direct materials
D) Depreciation of factory building

Question 9

Which of the following types of costs is the least likely to be classified as variable?

A) Direct materials
B) Factory supplies
C) Direct labour
D) Administrative building rent

Question 10

The cost equation,y = $400 + $5x,represents:

A) a variable cost.
B) a fixed cost.
C) a mixed cost.
D) can not be determined

Question 11

Which of the following costs is the least likely to be classified as a fixed cost?

A) Factory rent
B) Plant manager salary
C) Direct materials
D) Depreciation on factory building

Question 12

As production decreases,fixed costs per unit ____.

A) increase.
B) decrease.
C) stay the same.
D) can not be predicted.

Question 13

You are given the following cost and volume information:
$$\begin{array} { c c } \begin{array} { c } \text { Volume } \\(\text { in units) }\end{array} & \begin{array} { c } \text { Cost per unit } \\( \text { in \$})\end{array} \\\hline 500&\$6 \\1000 &3\\1500 &2 \\\end{array}$$
Which type of cost is given?

A) Variable
B) Fixed
C) Step
D) Mixed

Question 14

You are given the following cost and volume information:
$$\begin{array} { c c } \begin{array} { c } \text { Volume } \\(\text { in units })\end{array} &\begin{array} { c } \text { Total Cost } \\( \text { in })\end{array}\\\hline 200 & \$ 1000 \\400 & 2000 \\600 & 3000\end{array}$$
Which type of cost is given?

A) Variable
B) Fixed
C) Step
D) Mixed

Question 15

The cost equation,y = $0 + $5.40x,represents:

A) a variable cost.
B) a fixed cost.
C) a mixed cost.
D) a step cost.

Question 16

Which of the following types of costs are the most likely to be classified as fixed?

A) Factory utilities
B) Factory supplies
C) Direct labour
D) Factory insurance

Question 17

____ are costs that do not change in total when production volume increases or decreases within the relevant range.

A) Variable costs
B) Relevant costs
C) Fixed costs
D) Period costs

Question 18

When predicting cost behaviour,the volume of production for which the fixed and variable cost relationships are assumed to hold true is called the:

A) relevant cost area.
B) regression area.
C) dependent variable area.
D) relevant range.

Question 19

The cost equation,y = $500 + $0x,represents:

A) a variable cost.
B) a fixed cost.
C) a mixed cost.
D) a step cost.

Question 20

As production goes up,total fixed costs ____.

A) decrease.
B) increase.
C) stay the same.
D) can not be predicted.

Question 21

Jansen Inc.currently produces and sells 12 000 units per year with the following cost data:
$\begin{array}{ll}\text { Variable costs } & \$ 10 \text { per unit } \\\text { Fixed costs } & \$ 30000\end{array}$
Next year,Jansen plans to increase its advertising budget,which will increase fixed costs by 5 per cent.With increased advertising,the company expects the number of units produced and sold to increase by 8 per cent.What are budgeted total costs expected to be next year?

A) $151 500
B) $159 600
C) $161 100
D) $166 080

Question 22

Howard Inc.provides temporary clerical services to local businesses.The company has determined that total costs for a given month can be predicted by using the following formula:
Total Costs = $2500 + $20x
Where 'x' equals total direct labour hours for the month.If total direct labour hours for June are expected to be 600,what are total costs expected to be?

A) $ 9500
B) $14 500
C) $12 000
D) $ 2520

Question 23

Bob’s Burgers currently produces and sells 4000 burgers per month with the following costs:
$\begin{array}{ll}\text { Variable costs } & \$ .50 \text { per unit } \\\text { Fixed costs } & \$ 2000\end{array}$
Bob has recently switched food suppliers and anticipates that variable costs will decrease by $.05 per unit. In addition, Bob has renegotiated his store lease and fixed costs will be dropping by $40 per month.

-Bixby Inc.expects total costs to be $2500 when 80 units are sold and the variable cost is $10 per unit.Bixby expects to sell 90 units in July.What will be expected total costs in July?

A) $3400.00
B) $2600.00
C) $2812.50
D) $4200.00

Question 24

You run a regression analysis and receive the following results:
SUMMARY OUTPUT
$\begin{array}{l}\begin{array} { l r } \hline{ \text { Regression Statistics } } \\\hline \text { Multiple R } & 0.88000000 \\\text { R Square } & 0.78219168 \\\text { Adjusted R Square } & 0.70958891 \\\text { Standard Error } & 1165.19000 \\\text { Observations } & 5 \\\hline\end{array}\\\\\begin{array} { l c r c c r } \hline & d f & S S & M S & F & \text { Significance } F \\\hline \text { Regression } & 1 & 14626984.4 & 1 \mathrm { E } + 07 & 10.7736 & 0.0463451 \\\text { Residual } & 3 & 4073015.604 & 1 \mathrm { E } + 06 & & \\\text { Total } & 4 & 18700000 & & & \\\hline\end{array}\\\\\begin{array} { l r r r c } \hline & \text { Coefficients } & \text { Standard Error } & t \text { Stat } & P \text {-value } \\\hline \text { Intercept } & 16146.37 & 8167.49 & 1.977 & 0.14249 \\\text { X Variable 1 } & 2.380 & 0.730 & 3.282 & 0.04635 \\\hline\end{array}\end{array}$

-What would be the equation to predict total mixed costs?

A) Y = $2602.33 + $1.09x
B) Y = $454.25 + $.18x
C) Y = $3510.83 + $1.45x
D) Y = $3056.58 + $1.27x

Question 25

Which of the following statements is true regarding regression analysis?

A) It is often less accurate than the high/low method.
B) It is a better predictor of fixed costs than variable costs.
C) It can not be used to predict the effect that a change in volume of production has on net income.
D) It uses statistical methods to fit a cost line through a number of data points.

Question 26

You run a regression analysis and receive the following results:
SUMMARY OUTPUT
$\begin{array}{l}\begin{array} { l r } \hline{ \text { Regression Statistics } } \\\hline \text { Multiple R } & 0.88000000 \\\text { R Square } & 0.78219168 \\\text { Adjusted R Square } & 0.70958891 \\\text { Standard Error } & 1165.19000 \\\text { Observations } & 5 \\\hline\end{array}\\\\\begin{array} { l c r c c r } \hline & d f & S S & M S & F & \text { Significance } F \\\hline \text { Regression } & 1 & 14626984.4 & 1 \mathrm { E } + 07 & 10.7736 & 0.0463451 \\\text { Residual } & 3 & 4073015.604 & 1 \mathrm { E } + 06 & & \\\text { Total } & 4 & 18700000 & & & \\\hline\end{array}\\\\\begin{array} { l r r r c } \hline & \text { Coefficients } & \text { Standard Error } & t \text { Stat } & P \text {-value } \\\hline \text { Intercept } & 16146.37 & 8167.49 & 1.977 & 0.14249 \\\text { X Variable 1 } & 2.380 & 0.730 & 3.282 & 0.04635 \\\hline\end{array}\end{array}$

-When using regression analysis to predict mixed cost behaviour,which of the following would be the independent variable?

A) The highest level of activity
B) The lowest level of activity
C) The mixed cost at a given level of production
D) The volume of production that drives a particular amount of mixed cost

Question 27

Bob’s Burgers currently produces and sells 4000 burgers per month with the following costs:
$\begin{array}{ll}\text { Variable costs } & \$ .50 \text { per unit } \\\text { Fixed costs } & \$ 2000\end{array}$
Bob has recently switched food suppliers and anticipates that variable costs will decrease by $.05 per unit. In addition, Bob has renegotiated his store lease and fixed costs will be dropping by $40 per month.

-Quality Products Inc.incurred total costs of $50 000 to produce 1400 units.Variable costs are $15 per unit.What are estimated fixed costs?

A) $21 000
B) $71 000
C) $48 600
D) $29 000

Question 28

Which of the following statements is true regarding regression analysis?

A) It is usually the most accurate technique used to determine equivalent units.
B) It is usually the most accurate technique used to determine net income.
C) It is usually the most accurate technique used to determine the total units of production.
D) It is usually the most accurate technique used to determine mixed cost behaviour.

Question 29

You run a regression analysis and receive the following results:
SUMMARY OUTPUT
$\begin{array}{l}\begin{array} { l r } \hline{ \text { Regression Statistics } } \\\hline \text { Multiple R } & 0.88000000 \\\text { R Square } & 0.78219168 \\\text { Adjusted R Square } & 0.70958891 \\\text { Standard Error } & 1165.19000 \\\text { Observations } & 5 \\\hline\end{array}\\\\\begin{array} { l c r c c r } \hline & d f & S S & M S & F & \text { Significance } F \\\hline \text { Regression } & 1 & 14626984.4 & 1 \mathrm { E } + 07 & 10.7736 & 0.0463451 \\\text { Residual } & 3 & 4073015.604 & 1 \mathrm { E } + 06 & & \\\text { Total } & 4 & 18700000 & & & \\\hline\end{array}\\\\\begin{array} { l r r r c } \hline & \text { Coefficients } & \text { Standard Error } & t \text { Stat } & P \text {-value } \\\hline \text { Intercept } & 16146.37 & 8167.49 & 1.977 & 0.14249 \\\text { X Variable 1 } & 2.380 & 0.730 & 3.282 & 0.04635 \\\hline\end{array}\end{array}$

-To the nearest dollar,what would be the estimated total costs if 500 units were produced?

A) $ 544
B) $4236
C) $3692
D) $3147

Question 30

Logan Inc.plans to double its rental space next year which will increase its fixed costs by 40 per cent while variable costs remain the same.Current year costs are as follows:
$\begin{array}{ll}\text { Variable costs } & \$ 10 \text { per unit } \\\text { Fixed costs } & \$ 30000\end{array}$
If next year production is expected to be 20 000 units,estimated total costs will be:

A) $242 000
B) $230 000
C) $322 000
D) $212 000

Question 31

Regression analysis is a technique used to:

A) estimate the step and mixed components of total cost.
B) estimate the fixed and variable components of a mixed cost.
C) estimate the fixed and variable components of a step cost.
D) estimate the fixed and mixed components of step cost.

Question 32

When using regression analysis to predict mixed cost behaviour,which of the following would be the dependent variable?

A) The highest level of activity
B) The lowest level of activity
C) The mixed cost at a given level of production
D) The variable cost per unit

Question 33

Chadwick Ski Lodge
Chadwick Ski Lodge decides how many housekeepers it needs to hire based on expected hotel occupancy. The following shows the budgeted housekeeping costs per month at various occupancies:
$\begin{array}{ccc}\text { Number of occupied rooms } & \text { Housekeeping costs } & \\\hline 0-25 & \$ 1500 \\26-40 & 3000 \\41-55 & 4500\end{array}$

-What type of cost is housekeeping?

A) Fixed
B) Variable
C) Step
D) Mixed

Question 34

Bob’s Burgers currently produces and sells 4000 burgers per month with the following costs:
$\begin{array}{ll}\text { Variable costs } & \$ .50 \text { per unit } \\\text { Fixed costs } & \$ 2000\end{array}$
Bob has recently switched food suppliers and anticipates that variable costs will decrease by $.05 per unit. In addition, Bob has renegotiated his store lease and fixed costs will be dropping by $40 per month.

-What will be Bob's new cost equation?

A) Total costs = $2000 + $.50x
B) Total costs = $2000 + $.45x
C) Total costs = $4000 + $.50x
D) Total costs = $1960 + $.45x

Question 35

Chadwick Ski Lodge
Chadwick Ski Lodge decides how many housekeepers it needs to hire based on expected hotel occupancy. The following shows the budgeted housekeeping costs per month at various occupancies:
$\begin{array}{ccc}\text { Number of occupied rooms } & \text { Housekeeping costs } & \\\hline 0-25 & \$ 1500 \\26-40 & 3000 \\41-55 & 4500\end{array}$

-The number of occupied rooms during the month of January is expected to be between 41 and 55 at all times.For the month of January,what type of cost does housekeeping effectively become?

A) Fixed
B) Variable
C) Step
D) Mixed

Question 36

A cost that has both a fixed and variable component is called a:

A) step cost.
B) mixed cost.
C) product cost.
D) relevant cost.

Question 37

You run a regression analysis and receive the following results:
SUMMARY OUTPUT
$\begin{array}{l}\begin{array} { l r } \hline{ \text { Regression Statistics } } \\\hline \text { Multiple R } & 0.88000000 \\\text { R Square } & 0.78219168 \\\text { Adjusted R Square } & 0.70958891 \\\text { Standard Error } & 1165.19000 \\\text { Observations } & 5 \\\hline\end{array}\\\\\begin{array} { l c r c c r } \hline & d f & S S & M S & F & \text { Significance } F \\\hline \text { Regression } & 1 & 14626984.4 & 1 \mathrm { E } + 07 & 10.7736 & 0.0463451 \\\text { Residual } & 3 & 4073015.604 & 1 \mathrm { E } + 06 & & \\\text { Total } & 4 & 18700000 & & & \\\hline\end{array}\\\\\begin{array} { l r r r c } \hline & \text { Coefficients } & \text { Standard Error } & t \text { Stat } & P \text {-value } \\\hline \text { Intercept } & 16146.37 & 8167.49 & 1.977 & 0.14249 \\\text { X Variable 1 } & 2.380 & 0.730 & 3.282 & 0.04635 \\\hline\end{array}\end{array}$

-To the nearest dollar,what would be the estimated total costs if 3000 units were produced?

A) $23 286
B) $16 146
C) $10 357
D) $33 643

Question 38

Which of the following statements is false regarding regression analysis?

A) It is used to predict the fixed and variable components of a mixed cost.
B) It is used to predict whether or not a cost is a product or period cost.
C) It is usually more accurate than the high/low method.
D) It uses statistical methods to fit a cost line through a number of data points.

Question 39

You run a regression analysis and receive the following results:
SUMMARY OUTPUT
$\begin{array}{l}\begin{array} { l r } \hline{ \text { Regression Statistics } } \\\hline \text { Multiple R } & 0.88000000 \\\text { R Square } & 0.78219168 \\\text { Adjusted R Square } & 0.70958891 \\\text { Standard Error } & 1165.19000 \\\text { Observations } & 5 \\\hline\end{array}\\\\\begin{array} { l c r c c r } \hline & d f & S S & M S & F & \text { Significance } F \\\hline \text { Regression } & 1 & 14626984.4 & 1 \mathrm { E } + 07 & 10.7736 & 0.0463451 \\\text { Residual } & 3 & 4073015.604 & 1 \mathrm { E } + 06 & & \\\text { Total } & 4 & 18700000 & & & \\\hline\end{array}\\\\\begin{array} { l r r r c } \hline & \text { Coefficients } & \text { Standard Error } & t \text { Stat } & P \text {-value } \\\hline \text { Intercept } & 16146.37 & 8167.49 & 1.977 & 0.14249 \\\text { X Variable 1 } & 2.380 & 0.730 & 3.282 & 0.04635 \\\hline\end{array}\end{array}$

-What would be the equation to predict mixed cost behaviour?

A) Y = $2.38 + $16 146.37x
B) Y = $1165.19 + $.88x
C) Y = $16 146.37 + $2.38x
D) Y = $8167.49 + $.73x

Question 40

Bob’s Burgers currently produces and sells 4000 burgers per month with the following costs:
$\begin{array}{ll}\text { Variable costs } & \$ .50 \text { per unit } \\\text { Fixed costs } & \$ 2000\end{array}$
Bob has recently switched food suppliers and anticipates that variable costs will decrease by $.05 per unit. In addition, Bob has renegotiated his store lease and fixed costs will be dropping by $40 per month.

-Bob anticipates selling 4200 burgers during the month of July.What will be estimated total costs during July?

A) $3850
B) $4000
C) $4100
D) $4410

Question 41

Mr. Quik Printers
Mr. Quik Printers documented the number of copies it made for customers as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } & \text { Number of copies } & \text { Total overhead costs } \\\hline \text { October } & 230000 & \$ 7400 \\\text { November } & 240000 & 7500 \\\text { December } & 280000 & 8000 \\\text { January } & 265000 & 7700 \\\text { February } & 248000 & 7550\end{array}$$

-Using the high/low method,what is the overhead cost equation?

A) Y = $400 + $.030x
B) Y = $4640 + $.012x
C) Y = $7630 + $.001x
D) Y = $5566 + $.008x

Question 42

Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } & \text { Number of gallons } & \text { Total overhead costs } \\\hline \text { July } & 160 & \$ 6500 \\\text { August } & 150 & 6100 \\\text { September } & 155 & 6700 \\\text { October } & 175 & 7000 \\\text { November } & 170 & 6800\end{array}$$

-Cardinal uses the high/low method to predict total overhead costs.If Cardinal anticipates using 200 gallons of solvent in December,what are expected total overhead costs?

A) $9778
B) $7900
C) $8133
D) $8000

Question 43

The after-tax benefit of a taxable cash receipt can be calculated as follows:

A) After-tax benefit = Pretax receipt * Tax rate
B) After-tax benefit = Pretax receipt *(1 - Tax rate)
C) After-tax benefit = Pretax receipt * (1 + Tax rate)
D) After-tax benefit = Pretax receipt / Tax rate

Question 44

Denver Manufacturing
Denver Manufacturing would like to do a better job budgeting for maintenance costs and, consequently, they have prepared a schedule showing maintenance costs and units produced for the past five months as follows:
$\begin{array}{lcc} & \begin{array}{c}\text { Number of } \\\text { units produced }\end{array} & \begin{array}{c}\text { Total } \\\text { maintenance costs }\end{array} \\\hline \text { January } & 5400 & \$ 4800 \\\text { February } & 6600 & 5180 \\\text { March } & 4900 & 4500 \\\text { April } & 5600 & 4900 \\\text { May } & 6000 & 5490\end{array}$

-Using the high/low method,if Denver expects to produce 5000 units in June,what will be budgeted total maintenance costs?

A) $4590
B) $4558
C) $4540
D) $4363

Question 45

Mr. Quik Printers
Mr. Quik Printers documented the number of copies it made for customers as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } & \text { Number of copies } & \text { Total overhead costs } \\\hline \text { October } & 230000 & \$ 7400 \\\text { November } & 240000 & 7500 \\\text { December } & 280000 & 8000 \\\text { January } & 265000 & 7700 \\\text { February } & 248000 & 7550\end{array}$$

-Using the high/low method,what is the variable cost per unit?

A) $ .012
B) $ .030
C) $33.11
D) $83.33

Question 46

Hill Top Products has run a regression analysis comparing total production and utilities' costs for the past six months.The regression analysis shows an R square (R²)of .86.Which of the following statements best describes the meaning of R²?

A) 86 per cent of the company's total costs are utilities costs.
B) 86 per cent of the variation in utilities costs is not explained by the increase or decrease in production.
C) 86 per cent of the variation in utilities costs is explained by the increase or decrease in production.
D) 86 per cent of the company's total costs are fixed costs and the remaining 14 per cent are variable costs.

Question 47

Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } & \text { Number of gallons } & \text { Total overhead costs } \\\hline \text { July } & 160 & \$ 6500 \\\text { August } & 150 & 6100 \\\text { September } & 155 & 6700 \\\text { October } & 175 & 7000 \\\text { November } & 170 & 6800\end{array}$$

-Using the high/low method,what is the variable cost per unit?

A) $ 25
B) $ .03
C) $900
D) $ 36

Question 48

Putnam Distributors is contemplating whether or not to accept a special order.Putnam wishes to have after-tax cash receipts of $5200 if they accept the order.If Putnam has a tax rate of 35 per cent,what is the price the customer should be charged for their order?

A) $14 857
B) $ 3380
C) $ 8000
D) $ 7020

Question 49

Speedy Couriers documented the miles driven and total vehicle costs for the past five months as follows:
$$\begin{array} { l c c } & \text { Number of miles } & \text { Total vehicle costs } \\\hline \text { January } & 800 & \$ 1095 \\\text { February } & 1000 & 1440 \\\text { March } & 750 & 1200 \\\text { April } & 900 & 1380 \\\text { May } & 1100 & 1410\end{array}$$

-Using the high/low method,if Speedy expects to drive 1200 miles in June,what will be expected total vehicle costs?

A) $1470.00
B) $1515.00
C) $2056.50
D) $1720.88

Question 50

When comparing a 'pretax cost' and an 'after-tax cost',which of the following is true?

A) The after-tax cost will be greater than the pretax cost.
B) They will be the same amount.
C) The pretax cost will be greater than the after-tax cost.
D) The higher the tax rate,the lower the difference in the amount between them.

Question 51

Blossom Products is considering a special project that will increase sales revenue by $60 000 without affecting costs.If the company has a tax rate of 25 per cent,what will be the after-tax profit?

A) $ 60 000
B) $ 45 000
C) $ 15 000
D) $105 000

Question 52

The high/low method:

A) considers only the highest and lowest costs for a given time period.
B) is superior to regression analysis.
C) considers all data points available.
D) uses the data points for only the high and low levels of activity.

Question 53

George's Ice Cream Shop believes most of its utilities costs are mixed.George has collected the following data on gallons of ice cream used and related utilities' costs for the past six months:
$\begin{array}{lcc} & \begin{array}{c}\text { Number of } \\\text { gallons used }\end{array} & \text { Utilities cost } \\\hline \text { May } & 20 & \$ 700 \\\text { June } & 30 & 850 \\\text { July } & 40 & 1100 \\\text { August } & 30 & 975 \\\text { September } & 25 & 900 \\\text { October } & 22 & 720\end{array}$
George has run a regression analysis on the above information and has come up with the following data:
$\begin{array}{lc} &{\text { Coefficients }} \\\hline \text { Intercept } & 374.4318 \\\text { X Variable 1 } & 18.29545 \\\hline\end{array}$
Comparing the high/low method to regression analysis,to the nearest dollar,which of the following formulas would be the best predictor of total estimated mixed costs?

A) Y = $300 + $20x
B) Y = $374 + $18x
C) Y = $900 + $30x
D) Y = $18 + $374x

Question 54

Speedy Couriers documented the miles driven and total vehicle costs for the past five months as follows:
$$\begin{array} { l c c } & \text { Number of miles } & \text { Total vehicle costs } \\\hline \text { January } & 800 & \$ 1095 \\\text { February } & 1000 & 1440 \\\text { March } & 750 & 1200 \\\text { April } & 900 & 1380 \\\text { May } & 1100 & 1410\end{array}$$

-Using the high/low method,what is the cost equation to predict total vehicle costs?

A) Y = $52.50 + $1.67x
B) Y = $255 + $1.05x
C) Y = $285 + $1.725x
D) Y = $750 + $.60x

Question 55

The manager of a company is considering a special project that will increase sales revenue by $90 000 without affecting costs.If the company has a tax rate of 30 per cent,what will be the after-tax profit?

A) $ 63 000
B) $ 27 000
C) $ 90 000
D) $117 000

Question 56

Denver Manufacturing
Denver Manufacturing would like to do a better job budgeting for maintenance costs and, consequently, they have prepared a schedule showing maintenance costs and units produced for the past five months as follows:
$\begin{array}{lcc} & \begin{array}{c}\text { Number of } \\\text { units produced }\end{array} & \begin{array}{c}\text { Total } \\\text { maintenance costs }\end{array} \\\hline \text { January } & 5400 & \$ 4800 \\\text { February } & 6600 & 5180 \\\text { March } & 4900 & 4500 \\\text { April } & 5600 & 4900 \\\text { May } & 6000 & 5490\end{array}$

-Using the high/low method,what is the cost equation to predict total maintenance costs?

A) Y = $90 + $.90x
B) Y = $2540 + $.40x
C) Y = $1646 + $.5824x
D) Y = $2.50x - $11 320

Question 57

In regression analysis,an R square (R²)of 1.0 would indicate:

A) that 1 per cent of the data points are on the regression line.
B) that 1 per cent of the total mixed costs can be attributable to fixed costs.
C) that 1 per cent of the total mixed costs can be attributable to variable costs.
D) that there is a perfect correlation between the independent and dependent variables.

Question 58

After-tax net income can be calculated as follows:

A) After-tax income = Pretax income * Tax rate
B) After-tax income = Pretax income / (1 - Tax rate)
C) After-tax income = Pretax income * (1 + Tax rate)
D) After-tax income = Pretax income * (1 - Tax rate)

Question 59

When using the high/low method,the change in cost divided by the change in volume is:

A) the fixed cost per unit.
B) the mixed cost per unit.
C) the variable cost per unit.
D) the total cost per unit.

Question 60

Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } & \text { Number of gallons } & \text { Total overhead costs } \\\hline \text { July } & 160 & \$ 6500 \\\text { August } & 150 & 6100 \\\text { September } & 155 & 6700 \\\text { October } & 175 & 7000 \\\text { November } & 170 & 6800\end{array}$$

-Using the high/low method,what is equation to predict total overhead costs?

A) Y = $700 + $36x
B) Y = $900 + $25x
C) Y = $175 + $41x
D) Y = $100 + $40x

Question 61

B & B Manufacturing
B & B Manufacturing produces a single product. Last year, the company produced 10 000 units out of which 9500 were sold. There were no units in beginning inventory. The company had the following costs:
$\begin{array}{cr}\underline{\text { Variable costs per unit: }}\\\text { Production } & \$ 6.00 \\\text { Selling and administrative } & \$ 2.00 \\\underline{\text { Fixed costs (total):} } & \\ \text { Production } & \$ 15000 \\\text { Selling and administrative } &\$ 10000 \end{array}$

-What is the unit product cost using variable costing?

A) $ 8.00
B) $ 6.00
C) $ 7.50
D) $10.50

Question 62

Blue Ridge Resorts has the following pretax information available for the current year:
$\begin{array}{cc} \text {Pretax receipts } &\$800000\\ \text { Pretax costs } &300000\\\end{array}$

Assuming all receipts are taxable and all costs are tax-deductible,what will be Blue Ridge's after-tax net income for the year if their tax rate is 30 per cent?

A) $330 000
B) $150 000
C) $350 000
D) $770 000

Question 63

Beauregard Imports has pretax income of $75 000.If their tax rate is 35 per cent,what will be their after-tax income?

A) $ 48 750
B) $123 750
C) $ 26 250
D) $214 285

Question 64

Under absorption costing,which of the following is not considered a product cost?

A) Direct labour
B) Fixed manufacturing overhead
C) Variable manufacturing overhead
D) Administrative costs

Question 65

Which of the following descriptions would not be found on an income statement prepared using variable costing?

A) Sales
B) Fixed costs
C) Cost of goods sold
D) Net income

Question 66

The primary difference between variable and absorption costing is the treatment of:

A) fixed selling and administrative costs.
B) variable selling and administrative costs.
C) fixed manufacturing overhead.
D) variable manufacturing overhead.

Question 67

Cornell Products
Cornell Products has the following cost information available for 2009:
$$\begin{array} { l r } \text { Direct materials } & \$ 1.00 \text { per unit } \\\text { Direct labour } & \$ 2.00 \text { per unit } \\\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \\\text { Variable selling and administrative costs } & \$ 50 \text { per unit } \\\text { Fixed manufacturing overhead } & \$ 30000 \\\text { Fixed selling and administrative costs } & \$ 25000\end{array}$$
During 2009, Cornell produced 6000 units out of which 5400 units were sold for $20 each.

-What is net income under absorption costing?

A) $23 000
B) $29 000
C) $26 000
D) $35 000

Question 68

Manning Inc.is contemplating the rental of a special tool for $3000 per month.If their tax rate is 35 per cent,what is the after-tax monthly cost of renting the tool?

A) $1950
B) $3000
C) $1050
D) $4050

Question 69

Cornell Products
Cornell Products has the following cost information available for 2009:
$$\begin{array} { l r } \text { Direct materials } & \$ 1.00 \text { per unit } \\\text { Direct labour } & \$ 2.00 \text { per unit } \\\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \\\text { Variable selling and administrative costs } & \$ 50 \text { per unit } \\\text { Fixed manufacturing overhead } & \$ 30000 \\\text { Fixed selling and administrative costs } & \$ 25000\end{array}$$
During 2009, Cornell produced 6000 units out of which 5400 units were sold for $20 each.

-What is net income under variable costing?

A) $35 000
B) $29 000
C) $26 000
D) $23 000

Question 70

Tyson Manufacturing
Tyson Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}\text { Direct materials } & \$ 6.00 \text { per unit } \\\text { Direct labour } & \$ 2.00 \text { per unit } \\\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \\\text { Variable selling and administrative costs } & \$ 3.00 \text { per unit } \\\text { Fixed manufacturing overhead } & \$ 40000 \\\text { Fixed selling and administrative costs } & \$ 50000\end{array}$
During 2009, Tyson produced 10 000 units out of which 9100 units were sold for $50 each.

-What is net income under variable costing?

A) $251 250
B) $254 850
C) $285 000
D) $291 250

Question 71

Assuming that the number of units produced is less than the number of units sold,which of the following statements is true when comparing net income using absorption and variable costing?

A) Absorption costing will yield a higher net income.
B) Variable costing will yield a higher net income.
C) Net income will be the same under both methods.
D) The sales price per unit will be less using absorption costing.

Question 72

Tyson Manufacturing
Tyson Manufacturing has the following cost information available for 2009:
$\begin{array}{lr}\text { Direct materials } & \$ 6.00 \text { per unit } \\\text { Direct labour } & \$ 2.00 \text { per unit } \\\text { Variable manufacturing overhead } & \$ 1.50 \text { per unit } \\\text { Variable selling and administrative costs } & \$ 3.00 \text { per unit } \\\text { Fixed manufacturing overhead } & \$ 40000 \\\text { Fixed selling and administrative costs } & \$ 50000\end{array}$
During 2009, Tyson produced 10 000 units out of which 9100 units were sold for $50 each.

-What is net income under absorption costing?

A) $251 250
B) $254 850
C) $285 000
D) $299 850

Question 73

Which of the following statements is false regarding absorption costing?

A) Variable overhead is treated as a product cost.
B) Absorption costing is required for external financial statements prepared in accordance with generally accepted accounting principles (GAAP).
C) Fixed overhead is treated as a product cost.
D) Fixed overhead is expensed in the period incurred.

Question 74

Portia's Salon is contemplating an increase in their rental space that will result in a before-tax rent increase of $1000 per month.If their tax rate is 30 per cent,what is the after-tax monthly increase in rent cost?

A) $1000
B) $ 700
C) $ 300
D) $1700

Question 75

Under variable costing,which of the following is not considered a product cost?

A) Direct materials
B) Direct labour
C) Fixed manufacturing overhead
D) Variable manufacturing overhead

Question 76

Assuming the number of units sold and produced are the same,which of the following statements is true when comparing net income using absorption and variable costing?

A) Absorption costing will yield a higher net income.
B) Variable costing will yield a higher net income.
C) Net income will be the same under both methods.
D) Variable costing will have higher sales revenue.

Question 77

Which of the following statements is false regarding variable costing?

A) Variable overhead is treated as a product cost.
B) Variable costing is required for external financial statements prepared in accordance with generally accepted accounting principles (GAAP).
C) Fixed overhead is treated as a period cost.
D) Period costs are expensed as they are incurred.

Question 78

Triangle Associates is contemplating making a large charitable contribution.If their tax rate is 35 per cent,what is the after-tax cost of making a $20 000 contribution?

A) $27 000
B) $ 7000
C) $20 000
D) $13 000

Question 79

Assuming that the number of units produced is greater than the number of units sold,which of the following statements is true when comparing net income using absorption and variable costing?

A) Absorption costing will yield a higher net income.
B) Variable costing will yield a higher net income.
C) Net income will be the same under both methods.
D) Sales revenue will be less using absorption costing.

Question 80

Which of the following line descriptions would not be found on an income statement prepared using absorption costing?

A) Sales
B) Contribution margin
C) Cost of goods sold
D) Net income