Question 1

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

To find the manufacturing cost for the business unit in Spain, we need to use the given data:

- Direct material cost per unit: £3
- Direct labor cost per unit: £5
- Variable manufacturing overhead per unit: £1
- Fixed manufacturing overhead per month: £7,000

Total manufacturing cost per unit = Direct material cost + Direct labor cost + Variable manufacturing overhead per unit
= £3 + £5 + £1
= £9

Total expected manufacturing cost for 2,000 units = Total manufacturing cost per unit x Number of units + Fixed manufacturing overhead per month
= £9 x 2,000 + £7,000
= £18,000 + £7,000
= £25,000

Therefore, the correct answer is B) £39,500, which is the sum of the manufacturing cost for Spain (£25,000) and the manufacturing costs for the other two business units:

- Germany: £8,000
- France: £6,500

Total manufacturing cost for all three business units = £25,000 + £8,000 + £6,500
= £39,500

Question 2

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The gross margin can be calculated by subtracting the total costs from the total sales revenue. For the France business unit:- Total sales revenue = Selling price per unit * Number of units = £35 * 4,000 = £140,000.- Total manufacturing cost = Fixed manufacturing cost + (Variable manufacturing cost per unit * Number of units) = £4,000 + (£17 * 4,000) = £4,000 + £68,000 = £72,000.- Total administrative expense = Fixed administrative expense + (Variable administrative expense per unit * Number of units) = £2,500 + (£2.50 * 4,000) = £2,500 + £10,000 = £12,500.- Sales commissions = 15% of sales = 0.15 * £140,000 = £21,000.- Advertising expense = £2,000.Total costs = Manufacturing cost + Administrative expense + Sales commissions + Advertising expense = £72,000 + £12,500 + £21,000 + £2,000 = £107,500.Gross margin = Total sales revenue - Total costs = £140,000 - £107,500 = £32,500.However, there seems to be a mistake in my calculation as none of the options match the result. Let's correct the calculation:Total sales revenue = £35 * 4,000 = £140,000.Total variable costs = (Variable manufacturing cost + Variable administrative expense + Sales commission rate * Selling price) * Number of units = (£17 + £2.50 + 0.15 * £35) * 4,000. However, the sales commission should be calculated on the total sales, not per unit in this manner.Correct approach for total costs:- Manufacturing cost = £4,000 + (£17 * 4,000) = £72,000.- Administrative expense = £2,500 + (£2.50 * 4,000) = £12,500.- Sales commissions = 15% of £140,000 = £21,000.- Advertising expense = £2,000.Total costs = £72,000 + £12,500 + £21,000 + £2,000 = £107,500.Gross margin = Total sales - Total costs = £140,000 - £107,500 = £32,500.Given the options and the mistake in the calculation, it's clear there was an error in my explanation. The correct calculation should align with the provided options, suggesting a reevaluation of the total costs and gross margin based on the correct interpretation of the data. The correct answer should reflect the total sales revenue minus the correctly calculated total costs, which involves accurately accounting for each component of the cost structure provided in the question. Given the discrepancy, the correct gross margin calculation should be revisited with the right figures.

Question 3

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

Mixed costs have both variable and fixed components, and separation into those components is necessary for accurate planning, control, and decision-making purposes. Converting fixed costs into a per-unit basis or ignoring variable costs is not helpful, and eliminating discretionary fixed costs may not be feasible or advisable depending on the circumstances.

Question 4

Contribution margin is defined as sales less discretionary fixed costs&#10;

Accepted Answer

Contribution margin is defined as sales less variable costs, not discretionary fixed costs.

Question 5

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The answer of European International has 3 separate business units...

Question 6

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

We are given the net operating income for each business unit and the expected sales for the French unit. To calculate the expected net operating income for the French unit, we need to multiply the expected sales (5,000 units) by the contribution margin per unit (which is the selling price per unit minus the variable cost per unit).

For the French unit, the contribution margin per unit is £15 - £5 = £10.

Therefore, the expected net operating income for the French unit is:

Net operating income = (Expected sales * Contribution margin per unit) - Fixed expenses

Net operating income = (5,000 units * £10 per unit) - £7,250

Net operating income = £42,750

Therefore, the best choice is B.

Question 7

When more than one factor causes variations in the variable element of a mixed cost, multiple regression analysis should be used.&#10;

Accepted Answer

The least-squares regression method is a type of multiple regression analysis that can be used to analyze a mixed cost when more than one factor causes variations in the variable element of the cost. This method involves using statistical techniques to identify and measure the relationship between the cost and the factors that affect it, and to estimate the fixed and variable components of the cost equation. The least-squares method involves minimizing the sum of the squared errors between the observed and predicted values of the cost, and determining the line of best fit that describes the relationship between the cost and the factors that influence it.

Question 8

In describing the cost equation, Y = a + bX, 'a' is&#10;A)the dependent variable, cost.&#10;B)the independent variable, the level of activity.&#10;C)the total fixed costs.&#10;D)the variable cost per unit of activity.

Accepted Answer

'a' represents the intercept or total fixed costs, which do not vary with the level of activity.

Question 9

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

-Bee Company's cost formula for total operating expenses, with 'X' equal to the number of units sold would be

A)Y = £123,200 + £4.80X.
B)Y = £123,200 + £6.80X.
C)Y = £275,000 + £4.80X.
D)Y = £166,200 + £6.80X.

Accepted Answer

The contribution margin per unit is £30 (selling price per unit of £40 less variable cost per unit of £10). Therefore, the expected contribution margin for 24,000 units is £30 x 24,000 = £720,000. However, the question states that this activity is within the relevant range, which means that fixed costs are not expected to change. Therefore, the expected contribution margin is £720,000 + £42,000 (fixed costs) = £762,000.

Question 10

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

-Bee Company's net operating income for the second quarter using the contribution approach is

A)£156,200.
B)£685,000.
C)£431,200.
D)£265,000.

Accepted Answer

The answer of Bee Company is a honey wholesaler. An...

Question 11

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The answer of European International has 3 separate business units...

Question 12

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The answer of European International has 3 separate business units...

Question 13

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The answer of European International has 3 separate business units...

Question 14

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The answer of European International has 3 separate business units...

Question 15

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

-If 24,000 units are sold during the third quarter and this activity is within the relevant range, Bee Company's expected contribution margin would be

A)£646,800.
B)£762,000.
C)£810,000.
D)£760,080.

Accepted Answer

The answer of Bee Company is a honey wholesaler. An...

Question 16

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The answer of European International has 3 separate business units...

Question 17

The term 'relevant range' refers to the levels of activity within which the assumptions relative to cost behavior are valid.&#10;

Accepted Answer

The answer of The term 'relevant range' refers to the...

Question 18

European International has 3 separate business units in the following countries. Data for each of the business units is given below: $\begin{array}{|l|l|l|l|}\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\\\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \\\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \\& \text { unit } & \text { unit } & \text { unit } \\\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \\\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \\\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \\\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\\\hline\end{array}$

-
For planning, control, and decision-making purposes

A)fixed costs should be converted to a per unit basis.
B)discretionary fixed costs should be eliminated.
C)variable costs should be ignored.
D)mixed costs should be separated into their variable and fixed components.

Accepted Answer

The answer of European International has 3 separate business units...

Question 19

When the activity level is expected to decline within the relevant range, what effects would be anticipated with respect to each of the following?&#10;A)Fixed cost per unit - INCREASE; Variable cost per unit - NO CHANGE&#10;B)Fixed cost per unit - INCREASE; Variable cost per unit - INCREASE&#10;C)Fixed cost per unit - NO CHANGE; Variable cost per unit - NO CHANGE&#10;D)Fixed cost per unit - NO CHANGE; Variable cost per unit - INCREASE

Accepted Answer

The answer of When the activity level is expected to...

Question 20

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

-Bee Company's cost formula for total operating expenses, with 'X' equal to the number of units sold would be

A)Y = £123,200 + £4.80X.
B)Y = £123,200 + £6.80X.
C)Y = £275,000 + £4.80X.
D)Y = £166,200 + £6.80X.

Accepted Answer

The answer of Bee Company is a honey wholesaler. An...

Question 21

Marger, Inc., provided the following data for two recent months: $\begin{array}{lrr}&\text { April }&\text {May }\\ \text { Sales in Units.} &3,200&4,500 \\ \text { Cost: } &\\ \text { Cost T} &5,600&5,600 \\ \text {Cost U } &4,480&6,300\\ \text { Cost 'W } & 3,950&5,250\\\end{array}$

-
Which of the following classifications best describes the behavior of Cost U

A)Variable
B)Fixed
C)Mixed
D)None of the above

Accepted Answer

The answer of Marger, Inc., provided the following data for...

Question 22

The planning horizon for a discretionary fixed cost usually encompasses many years.&#10;

Accepted Answer

The answer of The planning horizon for a discretionary fixed...

Question 23

The Blaine Company is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead costs equal £240,000. Of this amount, depreciation totals £80,000 (all fixed) and lubrication totals £72,000 (all variable). The remaining £88,000 of the total overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals £112,000.
Assume that the relevant range includes all of the activity levels mentioned in this problem.

-
The total fixed overhead costs for Blaine Company are most likely closest to

A)£112,000.
B)£120,000.
C)£ 40,000.
D)£ 80,000.

Accepted Answer

The answer of The Blaine Company is a highly automated...

Question 24

Within a relevant range, the amount of variable cost per unit&#10;A)differs at each activity level.&#10;B)remains constant at each activity level.&#10;C)increases as activity increases.&#10;D)decreases as activity increases.

Accepted Answer

The answer of Within a relevant range, the amount of...

Question 25

Carr Company reports the following data for the first six months of the year: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ MachineElectrica
$\begin{array}{lrr} \text { Month } & \text { Hours } & \text { Cost } \\ \text { January. } &400&£40\\ \text {February } &300&£ 30\\ \text {March } &400& £ 50 \\ \text { April } &300 &£ 40 \\ \text { May} &200&£30\\\text {June } &200 &£ 20\end{array}$

-
Using the least-squares regression method, the estimated monthly fixed component of the electrical cost is closest to

A)£5.
B)£20.
C)£6.
D)£10.

Accepted Answer

The answer of Carr Company reports the following data for...

Question 26

The concept of the relevant range does not apply when dealing with step variable costs&#10;

Accepted Answer

The answer of The concept of the relevant range does...

Question 27

An example of a committed fixed cost would be&#10;A)taxes on real estate.&#10;B)management development programs.&#10;C)public relations.&#10;D)advertising programs.

Accepted Answer

The answer of An example of a committed fixed cost...

Question 28

If the business unit in Italy plans to produce and sell 4,000 units next month, the expected gross margin would be&#10;A)&#163;81,000.&#10;B)&#163;83,000.&#10;C)&#163;68,750.&#10;D)&#163;87,000.

Accepted Answer

The answer of If the business unit in Italy plans...

Question 29

The Blaine Company is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead costs equal £240,000. Of this amount, depreciation totals £80,000 (all fixed) and lubrication totals £72,000 (all variable). The remaining £88,000 of the total overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals £112,000.
Assume that the relevant range includes all of the activity levels mentioned in this problem.

-
The total fixed overhead costs for Blaine Company are most likely closest to

A)£112,000.
B)£120,000.
C)£ 40,000.
D)£ 80,000.

Accepted Answer

The answer of The Blaine Company is a highly automated...

Question 30

The following data pertains to activity and maintenance costs for two recent years: $\begin{array}{lrr}& \text { Year } 2& \text { Year } 1 \\ \text {Activity level in units } &12,000&8,000\\ \text {Maintenance cost } &£ 15,000 &£ 12,000\\\end{array}$

Using the high-low method, the cost formula for maintenance would be:

A)£1.50 per unit.
B)£1.25 per unit.
C)£3,000 plus £1.50 per unit.
D)£6,000 plus £0.75 per unit.

Accepted Answer

The answer of The following data pertains to activity and...

Question 31

Factory overhead is an example of a&#10;A)mixed cost.&#10;B)fixed cost.&#10;C)variable cost.&#10;D)irrelevant cost.

Accepted Answer

The answer of Factory overhead is an example of a&#10;A)mixed...

Question 32

One difference between a step variable cost and a fixed cost is the width of the step&#10;

Accepted Answer

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Question 33

Carr Company reports the following data for the first six months of the year: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ MachineElectrica
$\begin{array}{lrr} \text { Month } & \text { Hours } & \text { Cost } \\ \text { January. } &400&£40\\ \text {February } &300&£ 30\\ \text {March } &400& £ 50 \\ \text { April } &300 &£ 40 \\ \text { May} &200&£30\\\text {June } &200 &£ 20\end{array}$

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Using the least-squares regression method, the estimated monthly fixed component of the electrical cost is closest to

A)£5.
B)£20.
C)£6.
D)£10.

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Question 34

On an income statement prepared by the traditional approach, costs are organised and presented according to function.&#10;

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Question 35

The Blaine Company is a highly automated manufacturer. At an activity level of 6,000 machine setups, total overhead costs equal £240,000. Of this amount, depreciation totals £80,000 (all fixed) and lubrication totals £72,000 (all variable). The remaining £88,000 of the total overhead cost consists of utility cost (mixed). At an activity level of 9,000 setups, utility cost totals £112,000.
Assume that the relevant range includes all of the activity levels mentioned in this problem.

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The total fixed overhead costs for Blaine Company are most likely closest to

A)£112,000.
B)£120,000.
C)£ 40,000.
D)£ 80,000.

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Question 36

Marger, Inc., provided the following data for two recent months: $\begin{array}{lrr}&\text { April }&\text {May }\\ \text { Sales in Units.} &3,200&4,500 \\ \text { Cost: } &\\ \text { Cost T} &5,600&5,600 \\ \text {Cost U } &4,480&6,300\\ \text { Cost 'W } & 3,950&5,250\\\end{array}$

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Which of the following classifications best describes the behavior of Cost U

A)Variable
B)Fixed
C)Mixed
D)None of the above

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Question 37

Which of the following costs, if expressed on a per unit basis, would be expected to vary inversely with the level of production and sales?&#10;A)Sales commissions.&#10;B)Fixed manufacturing overhead.&#10;C)Variable manufacturing overhead.&#10;D)Direct materials.

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Question 38

Marger, Inc., provided the following data for two recent months: $\begin{array}{lrr}&\text { April }&\text {May }\\ \text { Sales in Units.} &3,200&4,500 \\ \text { Cost: } &\\ \text { Cost T} &5,600&5,600 \\ \text {Cost U } &4,480&6,300\\ \text { Cost 'W } & 3,950&5,250\\\end{array}$

-
Which of the following classifications best describes the behavior of Cost U

A)Variable
B)Fixed
C)Mixed
D)None of the above

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Question 39

The relative proportion of variable, fixed, and mixed costs in a firm is known as the firm's&#10;A)contribution margin.&#10;B)cost structure.&#10;C)product mix.&#10;D)relevant range.

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Question 40

Total production costs for Gallop, Inc. are budgeted at £230,000 for 50,000 units of budgeted output and at £280,000 for 60,000 units of budgeted output. Because of the need for additional facilities, budgeted fixed costs for 60,000 units are 25% more than budgeted fixed costs for 50,000 units. How much is Gallop's budgeted variable cost per unit of output

A)£1.60.
B)£1.67.
C)£3.00.
D)£5.00.

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Question 41

Discretionary fixed costs&#10;A)have a planning horizon that covers many years.&#10;B)may be reduced for short periods of time with minimal damage to the long-run goals of the organisation.&#10;C)cannot be reduced for even short periods of time without resulting in significant damage to the long-run goals of the organization.&#10;D)are most effectively controlled through the effective utilization of facilities and organization.

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Question 42

The R2 (i.e., R-squared) is a measure of the goodness-of-fit in least-squares regression, True or&#10;

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Question 43

A merchandising company typically will have a high proportion of which type of cost in its cost structure&#10;A)Variable.&#10;B)Fixed.&#10;C)Semivariable.&#10;D)Step-variable.

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Question 44

A disadvantage of the high-low method of cost analysis is that&#10;A)it cannot be used when there are a very large number of observations.&#10;B)it is too time consuming to apply.&#10;C)it uses two extreme data points, which may not be representative of normal conditions.&#10;D)it relies totally on the judgment of the person performing the cost analysis.

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Question 45

Account analysis is a method for analysing cost behavior in which each account under consideration is classified as either variable or fixed based upon the analyst's prior knowledge of how the cost in the account behaves.

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Question 46

Rible Company has observed that at an activity level of 8,000 units the cost for maintenance is £15,000, and at 10,000 units the cost for maintenance is £16,500. Using the high-low method, the cost formula for maintenance is

A)£15,000 plus £0.15 per unit.
B)£9,000 plus £0.75 per unit.
C)£1.65 per unit.
D)£1.875 per unit.

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Question 47

The cost of goods sold in a merchandising firm typically would be classified as a&#10;A)fixed cost.&#10;B)variable cost.&#10;C)step-variable cost.&#10;D)mixed cost.

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Question 48

If the business unit in France plans to produce sell 3,000 units next month, the expected contribution margin would be&#10;A)&#163;30,750.&#10;B)&#163;74,250.&#10;C)&#163;26,750.&#10;D)&#163;96,500.

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Question 49

Which of the following types of firms likely would have a high proportion of variable costs in its cost structure?&#10;A)Public utility&#10;B)Airline.&#10;C)Fast food outlet.&#10;D)Architectural firm.

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Question 50

Compton Company is a wholesale distributor of educational CD-ROMs. The company's records indicate the following:$\begin{array}{lrr}&#10;&\text { This Year}&\text { Last Year }\&#10;  \text { Units Sold } &250,000&200,000\&#10; \text { Sales Revenue } & &#163; 1,250,000 &&#163; 1,000,000\&#10; \text { Less: Cost of Goods Sold } &\underline{875,000} &\underline{ 700,000} \&#10; \text {Gross Margin  } &375,000 & 300,000 \&#10; \text {Less: Operating Expenses  } &\underline{222,000} &\underline{210,000}\&#10; \text {Net Operating Income  } &&#163; 153,000& &#163; 90,000\&#10;\end{array}$&#10;&#10;&#10;&#10;-Using the high-low method of analysis, what are the company's estimated total fixed operating expenses per year?&#10;&#10;A)&#163;60,000&#10;B)&#163;174,000&#10;C)&#163;150,000&#10;D)&#163;162,000

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Question 51

Compton Company is a wholesale distributor of educational CD-ROMs. The company's records indicate the following:$\begin{array}{lrr}&#10;&\text { This Year}&\text { Last Year }\&#10;  \text { Units Sold } &250,000&200,000\&#10; \text { Sales Revenue } & &#163; 1,250,000 &&#163; 1,000,000\&#10; \text { Less: Cost of Goods Sold } &\underline{875,000} &\underline{ 700,000} \&#10; \text {Gross Margin  } &375,000 & 300,000 \&#10; \text {Less: Operating Expenses  } &\underline{222,000} &\underline{210,000}\&#10; \text {Net Operating Income  } &&#163; 153,000& &#163; 90,000\&#10;\end{array}$&#10;&#10;&#10;&#10;-What is the company's contribution margin for this year?&#10;&#10;A)&#163;315,000&#10;B)(&#163;667,500)&#10;C)&#163;375,000&#10;D)&#163;213,000

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Question 52

A variable cost remains constant in total amount, but varies per unit of activity&#10;

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Question 53

The high-low method uses cost and activity data from just two periods to establish a cost formula&#10;

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Question 54

Committed fixed costs are those that relate to the investment in facilities, equipment and the basic organisational structure of a company, True or&#10;

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Question 55

Compton Company is a wholesale distributor of educational CD-ROMs. The company's records indicate the following:$\begin{array}{lrr}&#10;&\text { This Year}&\text { Last Year }\&#10;  \text { Units Sold } &250,000&200,000\&#10; \text { Sales Revenue } & &#163; 1,250,000 &&#163; 1,000,000\&#10; \text { Less: Cost of Goods Sold } &\underline{875,000} &\underline{ 700,000} \&#10; \text {Gross Margin  } &375,000 & 300,000 \&#10; \text {Less: Operating Expenses  } &\underline{222,000} &\underline{210,000}\&#10; \text {Net Operating Income  } &&#163; 153,000& &#163; 90,000\&#10;\end{array}$&#10;&#10;&#10;&#10;-&#10;Using the high-low method of analysis, what are the company's estimated variable operating expenses per unit&#10;&#10;A)&#163;0.24&#10;B)&#163;4.17&#10;C)&#163;0.88&#10;D)&#163;0.96

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Question 56

The contribution approach to the income statement classifies costs by function rather than by behavior&#10;

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Question 57

If the level of activity increases within the relevant range&#10;A)variable cost per unit and total fixed costs also increase.&#10;B)fixed cost per unit and total variable cost also increases.&#10;C)total cost will increase and fixed cost per unit will decrease.&#10;D)variable cost per unit and total cost also increases.

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Question 58

Stott Company requires one dockhand for every 500 packages loaded daily. The wages for these dockhands would be classified as&#10;A)variable.&#10;B)mixed.&#10;C)step-variable.&#10;D)curvilinear.

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Question 59

Fixed cost remains constant if expressed on a unit basis&#10;

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Question 60

The contribution format is widely used for preparing external financial statements&#10;

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Question 61

In practice, how practical is it to split costs into fixed and variable ones?

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Question 62

An example of a discretionary fixed cost would be&#10;A)taxes on the factory.&#10;B)depreciation on manufacturing equipment.&#10;C)insurance.&#10;D)research and development.

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Question 63

When the level of activity increases within the relevant range, how does each of the following change&#10;A)Average cost per unit INCREASES; Total variable cost INCREASES; Fixed cost per unit INCREASES&#10;B)Average cost per unit INCREASES; Total variable cost - NO CHANGE; Fixed cost per unit INCREASES&#10;C)Average cost per unit DECREASES; Total variable cost - NO CHANGE; Fixed cost per unit DECREASES&#10;D)Average cost per unit DECREASES; Total variable cost INCREASES; Fixed cost per unit DECREASES

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Question 64

Explain the reasoning for splitting cost into fixed and variable. Explain the different ways in which this is important.

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Deck 5: Planning Budgeting and Behaviour