Deck 6: Activity Analysis, Cost Behavior, and Cost Estimation

Question 1

What type of cost exhibits the behavior shown below? $$\begin{array}{l}\text { Manufacturing }\\\begin{array} { c c } \text { Volume (Units) } & \text { Cost Per Unit } \\\hline 50,000 & \$ 1.95 \\70,000 & 1.95\end{array}\end{array}$$

A) Variable cost.
B) Fixed cost.
C) Semivariable cost.
D) Discretionary fixed cost.
E) Step-fixed cost.

Answer 1

Variable cost.

Question 2

Normal Company pays a sales commission of 4% on each unit sold. If a graph is prepared, with the vertical axis representing per-unit cost and the horizontal axis representing units sold, how would a line that depicts sales commissions be drawn?

A) As a straight diagonal line, sloping upward to the right.
B) As a straight diagonal line, sloping downward to the right.
C) As a horizontal line.
D) As a vertical line.
E) As a curvilinear line.

Answer 2

C

Question 3

When graphed, a typical variable cost appears as:

A) a horizontal line.
B) a vertical line.
C) a u-shaped line.
D) a diagonal line that slopes downward to the right.
E) a diagonal line that slopes upward to the right.

Answer 3

E

Question 4

A company observed a decrease in the cost per unit. All other things being equal, which of the following is most likely true?

A) The company is studying a variable cost, and total volume has increased.
B) The company is studying a variable cost, and total volume has decreased.
C) The company is studying a fixed cost, and total volume has increased.
D) The company is studying a fixed cost, and total volume has decreased.
E) The company is studying a fixed cost, and total volume has remained constant.

Question 5

The least-squares regression method of cost estimation relies on only two data points.

Question 6

Parker Corporation observed that when 25,000 units were sold, a particular cost amounted to $75,000, or $3.00 per unit. When volume increased by 10%, the cost totaled $82,500 (i.e., $3.00 per unit). The cost that Parker is studying can best be described as a:

A) variable cost.
B) fixed cost.
C) semivariable cost.
D) discretionary fixed cost.
E) step-fixed cost.

Question 7

Mismatched time periods is not an issue in the collection of data for cost estimation.

Question 8

When graphed, a typical fixed cost appears as:

A) a horizontal line.
B) a vertical line.
C) a u-shaped line.
D) a diagonal line that slopes downward to the right.
E) a diagonal line that slopes upward to the right.

Question 9

In regression analysis, the variable that is being predicted is known as the independent variable.

Question 10

Which of the following costs changes in direct proportion to a change in the activity level?

A) Variable cost.
B) Fixed cost.
C) Semivariable cost.
D) Step-variable cost.
E) Step-fixed cost.

Question 11

Which of the following choices denotes the typical cost behavior of advertising and sales commissions?

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 12

Variable costs change in direct proportion to a change in the activity level.

Question 13

The relationship between cost and activity is known as:

A) cost estimation.
B) cost prediction.
C) cost behavior.
D) cost analysis.
E) cost approximation.

Question 14

Wooster has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead, $165,000; fixed overhead, $250,000. If Wooster now revises its anticipated production slightly upward, it would expect:

A) total fixed overhead of $250,000 and a lower hourly rate for variable overhead.
B) total fixed overhead of $250,000 and the same hourly rate for variable overhead.
C) total fixed overhead of $250,000 and a higher hourly rate for variable overhead.
D) total variable overhead of less than $165,000 and a lower hourly rate for variable overhead.
E) total variable overhead of less than $165,000 and a higher hourly rate for variable overhead.

Question 15

A forecast of a cost at a particular level of activity is known as:

A) cost estimation.
B) cost prediction.
C) cost behavior.
D) cost analysis.
E) cost approximation.

Question 16

What type of cost exhibits the behavior shown below? $\begin{array}{rrr}\text { Manufacturing } & \text { Total } & \text { Cost } \\\text { Volume (Units) } & \text { Cost } & \text { Per Unit }\\50,000 & \$ 150,000 & \$ 3.00 \\80,000 & 150,000 & 1.88\end{array}$

A) Variable cost.
B) Fixed cost.
C) Semivariable cost.
D) Step-variable cost.
E) Mixed cost.

Question 17

Mastel Company has a variable selling cost. If sales volume increases, how will the total variable cost and the variable cost per unit behave?

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 18

Straight-line depreciation is a typical example of a:

A) variable cost.
B) step-variable cost.
C) fixed cost.
D) mixed cost.
E) curvilinear cost.

Question 19

The relevant range is that range of activity where a company achieves its maximum efficiency.

Question 20

Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are known as:

A) step-fixed costs.
B) step-variable costs.
C) semivariable costs.
D) curvilinear costs.
E) mixed costs.

Question 21

Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?

A) Semivariable cost.
B) Curvilinear cost.
C) Step-fixed cost.
D) Step-variable cost.
E) Fixed cost.

Question 22

Within the relevant range, a curvilinear cost function can sometimes be graphed as a:

A) sloping straight line.
B) jagged line.
C) vertical straight line.
D) curved line.
E) horizontal straight line.

Question 23

Rachelle Hamilton has a fast-food franchise and must pay a franchise fee of $45,000 plus 4% of gross sales. In terms of cost behavior, the fee is known as a:

A) variable cost.
B) fixed cost.
C) step-fixed cost.
D) semivariable cost.
E) curvilinear cost.

Question 24

A review of Parrish 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 Parrish anticipate at a volume of 85,000 units?

A) $1,020,000.
B) $1,040,000.
C) $1,060,000.
D) $1,080,000.
E) None of the other answers is correct.

Question 25

DuChien Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity amounted to $50,000; variable costs were $100,000. How much cost would the company anticipate if during the next period it produced and sold 102,000 units?

A) $150,000.
B) $151,000.
C) $152,000.
D) $153,000.
E) None of the other answers is correct.

Question 26

Amounts spent for charitable contributions are an example of a (n):

A) committed fixed cost.
B) committed variable cost.
C) discretionary fixed cost.
D) discretionary variable cost.
E) engineered cost.

Question 27

A variable cost that has a definitive physical relationship to the activity measure is called a (n):

A) discretionary cost.
B) engineered cost.
C) managed cost.
D) programmed cost.
E) committed cost.

Question 28

Committed fixed costs would include:

A) advertising.
B) research and development.
C) depreciation on buildings and equipment.
D) contributions to charitable organizations.
E) expenditures for direct labor.

Question 29

Which of the following is not an example of a committed fixed cost?

A) Property taxes.
B) Depreciation on buildings.
C) Salaries of management personnel.
D) Outlays for advertising programs.
E) Equipment rental costs.

Question 30

When graphed, a typical step-fixed cost appears as:

A) a horizontal line.
B) a vertical line.
C) a series of staggered horizontal lines.
D) a diagonal line that slopes downward to the right.
E) a diagonal line that slopes upward to the right.

Question 31

Costs that result from a company's ownership or use of facilities and its basic organizational structure are known as:

A) discretionary fixed costs.
B) committed fixed costs.
C) discretionary variable costs.
D) committed variable costs.
E) engineered costs.

Question 32

Within the relevant range of activity, costs:

A) can be estimated with reasonable accuracy.
B) can be expected to change radically.
C) exhibit decreasing marginal cost patterns.
D) exhibit increasing marginal cost patterns.
E) cannot be estimated satisfactorily.

Question 33

Bowman, Inc., has only variable costs and fixed costs. A review of the company's records disclosed that when 200,000 units were produced, fixed manufacturing costs amounted to $800,000 and the cost per unit manufactured totaled $11. On the basis of this information, how much cost would the firm anticipate at an activity level of 205,000 units?

A) $2,235,000.
B) $2,222,000.
C) $2,214,000.
D) $2,200,000.
E) None of the other answers is correct.

Question 34

The relevant range is that range of activity:

A) where a company achieves its maximum efficiency.
B) where units produced equal units sold.
C) where management expects the firm to operate.
D) where the firm will earn a profit.
E) where expected results are abnormally high.

Question 35

Which of the following would not typically be classified as a discretionary fixed cost?

A) Equipment depreciation.
B) Employee development (education) programs.
C) Advertising.
D) Outlays for research and development.
E) Charitable contributions.

Question 36

A mixed cost is also known as a:

A) semivariable cost.
B) step-fixed cost.
C) variable cost.
D) curvilinear cost.
E) discretionary cost.

Question 37

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

A) step-fixed cost.
B) step-variable cost.
C) semivariable cost.
D) curvilinear cost.
E) discretionary cost.

Question 38

Which of the following is (are) example(s) of a mixed cost?
I) A building that is used for both manufacturing and sales activities.
II) An employee's compensation, which consists of a flat salary plus a commission.
III) Depreciation that relates to five different machines.
IV) Maintenance cost that must be split between sales and administrative offices.

A) I only.
B) II only.
C) I and III.
D) I, III, and IV.
E) I, II, III, and IV.

Question 39

Property taxes are an example of a (n):

A) committed fixed cost.
B) committed variable cost.
C) discretionary fixed cost.
D) discretionary variable cost.
E) engineered cost.

Question 40

Each of Davisson's production managers (annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth. Davisson's salary cost can best be described as a:

A) variable cost.
B) semivariable cost.
C) step-variable cost.
D) fixed cost.
E) step-fixed cost.

Question 41

The high-low method and least-squares regression are used by accountants to:

A) evaluate divisional managers for purposes of raises and promotions.
B) choose among alternative courses of action.
C) maximize output.
D) estimate costs.
E) control operations.

Question 42

Which of the following methods of cost estimation relies on only two data points?

A) Least-squares regression.
B) The high-low method.
C) The visual-fit method.
D) Account analysis.
E) Multiple regression.

Question 43

Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze costs.
How much would Swanson's pay if it made 5,500 copies?

A) $382.50
B) $322
C) $300
D) $292.50
E) None of the other answers is correct.

Question 44

Hot'lanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year: $\begin{array}{lrr}\text { Month }&\text { Utilities }&\text { Machine Hours }\\\text { January } & \$ 8,700 & 800 \\\text { February } & 8,360 & 720 \\\text { March } & 8,950 & 810 \\\text { April } & 9,360 & 920 \\\text { May } & 9,625 & 950 \\\text { June } & 9,150 & 900\end{array}$ Using the high-low method, the utilities cost associated with 980 machine hours would be:

A) $9,510.
B) $9,660.
C) $9,700.
D) $9,790.
E) None of the other answers is correct.

Question 45

Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze costs.
Swanson's monthly fixed fee is:

A) $80.
B) $102.
C) $106.
D) $112.
E) None of the other answers is correct.

Question 46

The following data relate to the Lisle Company for May and August of the current year: $\begin{array}{lrr} & \text { May } & \text { August } \\\text { Maintenance hours } & 25,000 & 29,000 \\\text { Maintenance cost } & \$ 1,175,000 & \$ 1,247,000\end{array}$ May and August were the lowest and highest activity levels, and Lisle uses the high-low method to analyze cost behavior. Which of the following statements is true?

A) The variable maintenance cost is $43 per hour.
B) The variable maintenance cost is $45 per hour.
C) The variable maintenance cost is $47 per hour.
D) The fixed maintenance cost is $725,000 per month.
E) More than one of the other answers is true.

Question 47

Northlake, 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:

A) $24,000.
B) $90,000.
C) $210,000.
D) $234,000.
E) None of the other answers is correct.

Question 48

The nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the:

A) least-squares regression method.
B) high-low method.
C) visual-fit method.
D) account analysis method.
E) multiple regression method.

Question 49

Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze costs.
Swanson's variable cost per copy is:

A) $0.040.
B) $0.051.
C) $0.053.
D) $0.056.
E) None of the other answers is correct.

Question 50

Which of the following statements about the visual-fit method is (are) true?
I) The method results in the creation of a scatter diagram.
II) The method is not totally objective because of the manner in which the cost line is determined.
III) The method is especially helpful in the determination of outliers.

A) I only.
B) II only.
C) I and II.
D) I and III.
E) I, II, and III.

Question 51

Which of the following choices correctly classifies a committed fixed cost and a discretionary fixed cost?

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 52

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.
B) $22.00.
C) $25.00.
D) $30.40.
E) $33.40.

Question 53

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 fixed cost was:

A) $184,800.
B) $210,000.
C) $550,000.
D) $734,800.
E) $760,000.

Question 54

Which of the following techniques is not used to analyze cost behavior?

A) Least-squares regression.
B) High-low method.
C) Visual-fit method.
D) Linear programming.
E) Multiple regression.

Question 55

The following data relate to the Lisle Company for May and August of the current year: $\begin{array}{lrr} & \text { May } & \text { August } \\\text { Maintenance hours } & 25,000 & 29,000 \\\text { Maintenance cost } & \$ 1,175,000 & \$ 1,247,000\end{array}$ May and August were the lowest and highest activity levels, and Lisle uses the high-low method to analyze cost behavior. Which of the following statements is true?

A) The variable maintenance cost is $18 per hour.
B) The variable maintenance cost is $22 per hour.
C) The variable maintenance cost is $24 per hour.
D) The fixed maintenance cost is $72,000 per month.
E) More than one of the other answers is true.

Question 56

The following data relate to the Lisle Company for May and August of the current year: $\begin{array}{lrr} & \text { May } & \text { August } \\\text { Maintenance hours } & 25,000 & 29,000 \\\text { Maintenance cost } & \$ 1,175,000 & \$ 1,247,000\end{array}$ May and August were the lowest and highest activity levels, and Lisle uses the high-low method to analyze cost behavior. If maintenance hours are estimated to be 26,000 hours in October, which of the following statements is true?

A) The variable maintenance cost is $18 per hour.
B) The variable maintenance cost is $22 per hour.
C) The variable maintenance cost is $24 per hour.
D) The fixed maintenance cost is $72,000 per month.
E) More than one of the other answers is true.

Question 57

Which type of fixed cost (1) tends to be more long-term in nature and (2) can be cut back more easily in bad economic times without doing serious harm to organizational goals and objectives?

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 58

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, what were total maintenance costs when the company experienced 23,000 machine hours?

A) $193,200.
B) $550,000.
C) $734,800.
D) $743,200.
E) $760,000.

Question 59

Hot'lanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year: $\begin{array}{lrr}\text { Month }&\text { Utilities }&\text { Machine Hours }\\\text { January } & \$ 8,700 & 800 \\\text { February } & 8,360 & 720 \\\text { March } & 8,950 & 810 \\\text { April } & 9,360 & 920 \\\text { May } & 9,625 & 950 \\\text { June } & 9,150 & 900\end{array}$ The variable utilities cost per machine hour is:

A) $0.18.
B) $4.50.
C) $5.00.
D) $5.50.
E) None of the other answers is correct.

Question 60

Hot'lanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year: $\begin{array}{lrr}\text { Month }&\text { Utilities }&\text { Machine Hours }\\\text { January } & \$ 8,700 & 800 \\\text { February } & 8,360 & 720 \\\text { March } & 8,950 & 810 \\\text { April } & 9,360 & 920 \\\text { May } & 9,625 & 950 \\\text { June } & 9,150 & 900\end{array}$ The fixed utilities cost per month is:

A) $3,764.
B) $4,400.
C) $4,760.
D) $5,100.
E) None of the other answers is correct.

Question 61

Which of the following tools is not associated with cost estimation?

A) Least-squares regression.
B) Multiple regression.
C) Inversion equations.
D) Time and motion (engineering) studies.
E) Learning curves.

Question 62

Wesley Enterprises has determined that three variables play a key role in determining company revenues. To arrive at an objective forecast of revenues for the next accounting period, Wesley should use:

A) simple regression.
B) multiple regression.
C) a scatter diagram.
D) complex regression.
E) the high-low method.

Question 63

Booster, Inc. recently conducted a least-squares regression analysis to predict selling expenses. The company has constructed the following regression equation: Y = 329,000 + 7.80X. Which of the following statements is false if the primary cost driver is number of units sold?

A) The company anticipates $329,000 of fixed selling expenses.
B) "Y" represents total selling expenses.
C) The company expects both variable and fixed selling expenses.
D) For each unit sold, total selling expenses will increase by $7.80.
E) "X" represents the number of hours worked during the period.

Question 64

Chesley Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?

A) Total manufacturing overhead is represented by the variable "X."
B) The company anticipates $495,000 of fixed manufacturing overhead.
C) "X" is commonly known as the dependent variable.
D) "X" represents the number of machine hours.
E) The company anticipates $495,000 of fixed manufacturing overhead and "X" represents the number of machine hours.

Question 65

Vincente 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:
Vincente 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.
C. Calculate the total amount that Viscount would expect at a 75% utilization rate for Cost A, Cost B, and Cost
D. Develop an equation that Vincente can use to predict total cost for any level of hours within its range of operation.

Question 66

Mohammed Products has determined that the number of machine hours worked (MH) drives the amount of manufacturing overhead incurred (MOH). On the basis of this relationship, a staff analyst has constructed the following regression equation:
MOH = 240,000 + 8MH
Which of the choices correctly depicts the nature of Mohammed's variables?

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 67

The following data relate to the Lisle Company for May and August of the current year: $\begin{array}{lrr} & \text { May } & \text { August } \\\text { Maintenance hours } & 25,000 & 29,000 \\\text { Maintenance cost } & \$ 1,175,000 & \$ 1,247,000\end{array}$ May and August were the lowest and highest activity levels, and Lisle uses the high-low method to analyze cost behavior. If maintenance hours are estimated to be 26,000 hours in October, which of the following statements is true?

A) Total maintenance costs will be $1,175,000.
B) Total maintenance costs will be $1,182,000.
C) Total maintenance costs will be $1,193,000.
D) Total maintenance costs will be $1,221,000.
E) Total maintenance costs will be $1,247,000.

Question 68

Package Express, Inc. operates a small package delivery service in the Jacksonville suburbs. If the company uses a regression equation to forecast total operating costs, the coefficient of the equation's independent variable would correspond to the:

A) variable operating cost per delivery.
B) fixed operating costs.
C) number of deliveries.
D) total variable operating costs.
E) total operating costs.

Question 69

Temperance, Inc. is studying marketing cost and sales volume, and has generated the following information by use of a scatter diagram and a least-squares regression analysis: Temperance is now preparing an estimate for monthly sales of 18,000 units. On the basis of the data presented, compute the most accurate sales forecast possible.

A) $159,500.
B) $162,000.
C) $164,900.
D) $167,400.
E) None of the other answers is correct.

Question 70

In regression analysis, the variable that is being predicted is known as the:

A) independent variable.
B) dependent variable.
C) explanatory variable.
D) interdependent variable.
E) functional variable.

Question 71

Wel-care Corporation operates a small medical lab in Nebraska that conducts minor medical procedures (including blood tests and x-rays) for a number of doctors. The lab consumes various medical supplies and is staffed by two technicians, both of whom are paid a monthly salary. In addition, there is an on-site office manager who is also paid by the month.
Required:
A. If the lab's patient count increases by 15%, will the lab's total operating costs increase by 15%? Explain.
B. Wel-care is considering opening an additional lab in a new suburban medical building. What will likely happen to the lab's level of fixed cost incurrence? Why?
C. What analysis methods would be available to the office manager and/or Wel-care management if a close look at the lab's cost behavior is desired?

Question 72

Consider the six costs that follow.
1. Advertising and promotion costs of a do-it-yourself retailer
2. Surgical supplies used in a hospital's operating room
3. Aircraft depreciation charges of an airline
4. Utility charges that include a minimum-use fee, for a small business
5. Annual business licensing fee paid by a daycare center
6. Truck fuel consumed by a road construction company
Required:
A. Classify each of these costs as variable, committed fixed, discretionary fixed, or semivariable.
B. Briefly describe the behavior of a per-unit variable cost as activity changes.
C. What elements are present in a semivariable cost that cause it to behave in a semivariable manner?
D. Generally speaking, does management have more flexibility when dealing with committed fixed costs or discretionary fixed costs?

Question 73

Which of the following is not an issue in the collection of data for cost estimation?

A) Outliers.
B) Missing data.
C) Mismatched time periods.
D) Inflation.
E) All of the other answers are issues in data collection.

Question 74

A staff assistant at Whitmere Corporation recently determined that the first four units completed in a new manufacturing process took 800 hours to complete, or an average of 200 hours per unit. The assistant also found that when the cumulative output produced doubles, the average labor time declines by 20%. On the basis of this information, how many total hours would Washington use if it produces 16 units?

A) 128.
B) 160.
C) 1,280.
D) 2,048.
E) None of the other answers is correct.

Question 75

Yang Manufacturing, which uses the high-low method, makes a product called Yin. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below. $\begin{array}{lcccc} & \text { Type A } & \text { Type B } & \text { Type C } & \text { Total } \\5,000 \text { units } & \$ 4 & \$ 9 & \$ 4 & \$ 17 \\7,500 \text { units } & \$ 4 & \$ 6 & \$ 3 & \$ 13\end{array}$ The cost types shown above are identified by behavior as:

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question 76

Yang Manufacturing, which uses the high-low method, makes a product called Yin. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below. $\begin{array}{lcccc} & \text { Type A } & \text { Type B } & \text { Type C } & \text { Total } \\5,000 \text { units } & \$ 4 & \$ 9 & \$ 4 & \$ 17 \\7,500 \text { units } & \$ 4 & \$ 6 & \$ 3 & \$ 13\end{array}$ The cost formula that expresses the behavior of Yang's total cost is:

A) Y = $0 + $17X.
B) Y = $20,000 + $13X.
C) Y = $40,000 + $9X.
D) Y = $45,000 + $4X.
E) Y = $60,000 + $5X.

Question 77

Yang Manufacturing, which uses the high-low method, makes a product called Yin. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below. $\begin{array}{lcccc} & \text { Type A } & \text { Type B } & \text { Type C } & \text { Total } \\5,000 \text { units } & \$ 4 & \$ 9 & \$ 4 & \$ 17 \\7,500 \text { units } & \$ 4 & \$ 6 & \$ 3 & \$ 13\end{array}$ If Yang produces 10,000 units, the total cost would be:

A) $90,000.
B) $100,000.
C) $110,000.
D) $125,000.
E) None of the other answers is correct.

Question 78

Around Town, Inc. operates a small package delivery service in the Columbus suburbs. If the company uses a regression equation to forecast total operating costs, the equation's intercept would correspond to the:

A) variable operating cost per delivery.
B) fixed operating costs.
C) number of deliveries.
D) total variable operating costs.
E) total operating costs.

Question 79

Sunshine Valley Meat Company produces one of the best sausage products in Pennsylvania. The company's controller compiled the following information by analyzing the accounting records:
1. Meat costs the company $3.25 per pound of sausage produced.
2. Compensation of production employees is $2.25 per pound of sausage produced.
3. Supervisory salaries total $23,000 per month.
4. The company incurs utility costs of $9,000 per month plus $0.35 per pound of sausage produced.
5. Insurance and property taxes average $6,400 per month.
Required:
A. Classify each cost as variable, fixed, or semivariable.
B. Write a formula to express the behavior of the firm's production costs. (Use the form Y = a + bX, where X denotes the quantity of sausage produced.)

Question 80

The following selected data were taken from the accounting records of Schein Industrial Manufacturing:
Manufacturing overhead consists of three different costs; (1) machine supplies (variable), (2) property taxes (fixed), and (3) plant maintenance (semivariable). July's overhead costs were $170,000 for machine supplies, $24,000 for property taxes, and $1,080,000 for plant maintenance.
Required:
A. Determine the machine supplies and property taxes for May.
B. By using the high-low method, analyze Schein's plant maintenance cost and calculate the monthly fixed portion and the variable cost per machine hour.
C. Assume that present cost behavior patterns continue into future months. Estimate the total amount of manufacturing overhead the company can expect in September if 56,000 machine hours are worked.