ACCT 102 TEST 2 QUESTIONS AND
ANSWERS ALL CORRECT
Which one of the following is a name for the range over which a company expects to
operate? - Answer- Relevant range
Frazier Manufacturing Company collected the following production data for the past
month:
Units Produced Total Cost
1,600 $66,000
1,300 57,000
1,500 67,500
1,100 49,500
If the high-low method is used, what is the monthly total cost equation? - Answer- Total
cost = $13,200 + $33/unit
A mixed cost contains - Answer- a variable element and a fixed element.
At the high level of activity in November, 7,000 machine hours were run and power
costs were $18,000. In April, a month of low activity, 2,000 machine hours were run and
power costs amounted to $9,000. Using the high-low method, the estimated fixed cost
element of power costs is - Answer- $5,400.
Gribble Company's high and low level of activity last year was 60,000 units of product
produced in May and 20,000 units produced in November. Machine maintenance costs
were $156,000 in May and $60,000 in November. Using the high-low method,
determine an estimate of total maintenance cost for a month in which production is
expected to be 45,000 units. - Answer- $120,000
For analysis purposes, the high-low method usually produces a(n) - Answer- reasonable
estimate.
The high-low method is criticized because it - Answer- ignores much of the available
data by concentrating on only the extreme points.
The high-low method is often employed in analyzing - Answer- mixed costs.
, Faye Dunn defines contribution margin as the amount of profit available to cover
operating expenses. Is there any truth in this definition? - Answer- There is no truth in
Faye's statement.
Marshall Company's GWhiz calculator sells for $40. Variable costs per unit are
estimated to be $26. What are the unit contribution margin and the contribution margin
ratio? - Answer- Unit contribution margin $14
Contribution margin ratio 35%
J. P. Alexander claims that the relevant range concept is important only for variable
costs. Do you agree with J. P.'s claim? - Answer- Disagree
"The relevant range is indispensable in cost behavior analysis." Is this true? - Answer-
true
"Cost-volume-profit (CVP) analysis is based entirely on unit costs." Do you agree? -
Answer- NO
For an activity base to be useful in cost behavior analysis, - Answer- there should be a
correlation between changes in the level of activity and changes in costs.
A variable cost is a cost that - Answer- varies in total in proportion to changes in the
level of activity.
A cost which remains constant per unit at various levels of activity is a - Answer-
variable cost
Two costs at Bradshaw Company appear below for specific months of operation.
Month Amount Units Produced
Delivery costs September $ 40,000 40,000
October 55,000 60,000
Utilities September $ 84,000 40,000
October 126,000 60,000
Which type of costs are these? - Answer- Delivery costs are mixed and utilities are
variable.
An increase in the level of activity will have the following effects on unit costs for
variable and fixed costs:
Unit Variable Cost Unit Fixed Cost - Answer- Remains constant Decreases
A fixed cost is a cost which - Answer- remains constant in total with changes in the level
of activity.
ANSWERS ALL CORRECT
Which one of the following is a name for the range over which a company expects to
operate? - Answer- Relevant range
Frazier Manufacturing Company collected the following production data for the past
month:
Units Produced Total Cost
1,600 $66,000
1,300 57,000
1,500 67,500
1,100 49,500
If the high-low method is used, what is the monthly total cost equation? - Answer- Total
cost = $13,200 + $33/unit
A mixed cost contains - Answer- a variable element and a fixed element.
At the high level of activity in November, 7,000 machine hours were run and power
costs were $18,000. In April, a month of low activity, 2,000 machine hours were run and
power costs amounted to $9,000. Using the high-low method, the estimated fixed cost
element of power costs is - Answer- $5,400.
Gribble Company's high and low level of activity last year was 60,000 units of product
produced in May and 20,000 units produced in November. Machine maintenance costs
were $156,000 in May and $60,000 in November. Using the high-low method,
determine an estimate of total maintenance cost for a month in which production is
expected to be 45,000 units. - Answer- $120,000
For analysis purposes, the high-low method usually produces a(n) - Answer- reasonable
estimate.
The high-low method is criticized because it - Answer- ignores much of the available
data by concentrating on only the extreme points.
The high-low method is often employed in analyzing - Answer- mixed costs.
, Faye Dunn defines contribution margin as the amount of profit available to cover
operating expenses. Is there any truth in this definition? - Answer- There is no truth in
Faye's statement.
Marshall Company's GWhiz calculator sells for $40. Variable costs per unit are
estimated to be $26. What are the unit contribution margin and the contribution margin
ratio? - Answer- Unit contribution margin $14
Contribution margin ratio 35%
J. P. Alexander claims that the relevant range concept is important only for variable
costs. Do you agree with J. P.'s claim? - Answer- Disagree
"The relevant range is indispensable in cost behavior analysis." Is this true? - Answer-
true
"Cost-volume-profit (CVP) analysis is based entirely on unit costs." Do you agree? -
Answer- NO
For an activity base to be useful in cost behavior analysis, - Answer- there should be a
correlation between changes in the level of activity and changes in costs.
A variable cost is a cost that - Answer- varies in total in proportion to changes in the
level of activity.
A cost which remains constant per unit at various levels of activity is a - Answer-
variable cost
Two costs at Bradshaw Company appear below for specific months of operation.
Month Amount Units Produced
Delivery costs September $ 40,000 40,000
October 55,000 60,000
Utilities September $ 84,000 40,000
October 126,000 60,000
Which type of costs are these? - Answer- Delivery costs are mixed and utilities are
variable.
An increase in the level of activity will have the following effects on unit costs for
variable and fixed costs:
Unit Variable Cost Unit Fixed Cost - Answer- Remains constant Decreases
A fixed cost is a cost which - Answer- remains constant in total with changes in the level
of activity.
