Question 1

If a scatterplot reveals a fairly weak relationship between cost and volume, the manager should select a different activity for modeling cost behavior.

Accepted Answer

A weak relationship suggests that cost is not strongly influenced by volume, so another activity might better explain cost behavior.

Question 2

Outliers are abnormal data points.

Accepted Answer

Outliers are data points that are significantly different from other data points in a dataset, and can be considered abnormal.

Question 3

The controller for Andy's Bicycles has gathered the following cost and activity level information:
  a. What is the total cost of producing 1,000 racing bicycles?
b. What is the variable cost of producing each racing bicycle?
c. Suppose the controller uses the average cost to predict total costs. What total cost would the controller calculate for 2,500 racing bicycles?
d. If the controller uses the cost equation to predict total costs, what total cost would the controller calculate for 2,500 racing bicycles?
e. Is there a difference between the forecasted total cost using average cost versus the cost equation? If there is a difference, what creates the difference? If there is no difference, when would there be a difference?

Accepted Answer

The answer of The controller for Andy's Bicycles has gathered...

Question 4

When performing account analysis, managers decide how to classify each account as a variable, fixed or mixed cost.

Accepted Answer

This statement is true. In account analysis, managers assign costs to each account and classify them as variable, fixed or mixed cost based on their behavior and relationship with the level of activity.

Question 5

If the data points in a scatter plot fall in a fairly straight line, it means that there is a fairly strong relationship between cost and volume.

Accepted Answer

A fairly straight line in a scatter plot indicates a strong linear relationship between the variables being plotted. In this case, it suggests a strong relationship between cost and volume.

Question 6

George Company has a relevant range of 150,000 units to 400,000 units. The company has total fixed costs of $527,000. Total fixed and variable costs are $622,500 at a production level of 176,000 units. The variable cost per unit at 350,000 units is
A)$2.99
B)$0.27
C)$0.54
D)$3.54

Accepted Answer

First, we need to find the variable cost per unit using the information given.
Total cost = fixed cost + variable cost
At a production level of 176,000 units:
$622,500 = $527,000 + (176,000 x variable cost per unit)
Variable cost per unit = ($622,500 - $527,000) / 176,000
Variable cost per unit = $0.54
Next, we need to find the total variable cost at a production level of 350,000 units:
Total variable cost = 350,000 x $0.54
Total variable cost = $189,000
Therefore, the variable cost per unit at a production level of 350,000 units is $0.54. Answer choice C is the correct answer.

Question 7

Answer the following questions:
a. What is a cost equation?
b. If a company has fixed costs of $1,000 and variable costs of $4 per unit, what is their cost equation?
c. What would a company use a cost equation for?

Accepted Answer

The answer of Answer the following questions:
a. What is a...

Question 8

The following data pertain to costs at Massey Company:  The fixed cost per unit is
A)$3.04
B)$13.20
C)$16.24
D)$10.16

Accepted Answer

The fixed cost per unit can be calculated by finding the difference in total cost for two different levels of activity and dividing by the difference in units produced. Using the data from the table, we can calculate the fixed cost per unit as follows:
Fixed cost per unit = (Total cost at 9,000 units - Total cost at 7,000 units) / (9,000 units - 7,000 units)
Fixed cost per unit = ($122,400 - $96,800) / (2,000 units)
Fixed cost per unit = $12.20
Therefore, the best choice is B, $13.20, as it is the closest option to the calculated fixed cost per unit.

Question 9

At Dwight Incorporated, total fixed and variable costs are $420,000 at a production level of 130,000 units. The company has total fixed costs of $225,000. The variable cost per unit at 200,000 units is
A)$1.50
B)$1.73
C)$3.23
D)$0.98

Accepted Answer

The variable cost per unit can be calculated by first finding the total variable costs and then dividing by the number of units. Total variable costs are the total costs minus the fixed costs, which is $420,000 - $225,000 = $195,000. The variable cost per unit at 130,000 units is $195,000 / 130,000 = $1.50. Since variable cost per unit remains constant regardless of the number of units, it will also be $1.50 at 200,000 units.

Question 10

A scatterplot helps managers visualize the relationship between historical costs and volume.

Accepted Answer

A scatterplot is a useful tool for displaying and analyzing the relationship between two variables, such as historical costs and volume. It allows managers to see the overall pattern in their data and identify any potential outliers or trends.

Question 11

A scatterplot will help managers identify potential outliers.

Accepted Answer

Scatterplots allow managers to visually identify any data points that appear to be far away from the others, indicating a potential outlier.

Question 12

If a scatterplot reveals a fairly weak relationship between cost and volume, the cost equation based on that data would not be very useful for predicting future costs.

Accepted Answer

A scatterplot with a weak relationship between cost and volume indicates that there is a lot of variability in the data and the cost equation based on that data may not be a reliable predictor of future costs.

Question 13

Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5100 anchors, Sea Side Enterprises' average cost per anchor is $53 If $17,000 of the total costs are fixed, what is the variable cost of producing each anchor?
A)$3.33
B)$49.67
C)$320.75
D)$53.00

Accepted Answer

The average cost per anchor can be decomposed into fixed cost per anchor and variable cost per anchor. If we let variable cost per anchor be x, then we have:

$53 = $17,000/5100 + x

Solving for x, we get:

x = $49.67

Question 14

The following data pertain to costs at Massey Company:  The variable cost per unit is
A)$3.76
B)$15.24
C)$19.00
D)$11.48

Accepted Answer

The variable cost per unit can be calculated by subtracting the total fixed cost ($48,000) from the total cost at the highest activity level ($192,000) and then dividing the result by the total number of units produced at the highest activity level (40,000). This gives: 
Variable cost per unit = ($192,000 - $48,000) / 40,000 = $3.76. Therefore, the answer is choice A.

Question 15

If there is little or no relationship between the cost and the volume, the data points on a scatterplot will appear almost as a straight line.

Accepted Answer

If there is little or no relationship between the cost and the volume, the data points on a scatterplot will appear randomly scattered, not necessarily as a straight line.

Question 16

Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5300 anchors, Sea Side Enterprises' average cost per anchor is $57. What is the total cost of producing 5300 anchors?
A)$302,100
B)$5357
C)$57
D)$114

Accepted Answer

The total cost of producing 5300 anchors can be found by multiplying the average cost per anchor ($57) by the number of anchors (5300):
$57 x 5300 = $302,100. Therefore, the correct answer is (A).

Question 17

Outliers are data points that fall in the same general pattern as the other data points.

Accepted Answer

Outliers are data points that significantly deviate from the general pattern of the other data points.

Question 18

Rent on a factory building would likely be classified as a fixed cost.

Accepted Answer

Rent on a factory building is a type of fixed cost because it does not vary with the level of production or sales. It is a consistent expense that must be paid regardless of the amount of goods produced.

Question 19

At Dwight Incorporated, total fixed and variable costs are $410,000 at a production level of 120,000 units. The company has total fixed costs of $245,000. The fixed cost per unit at a production level of 200,000 units is
A)$3.42
B)$2.04
C)$1.67
D)$1.23

Accepted Answer

The answer of At Dwight Incorporated, total fixed and variable...

Question 20

Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5300 anchors, Sea Side Enterprises average cost per anchor is $54. If $18,000 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, her forecast for 9000 anchors will be (Round any intermediary calculations to the nearest cent.)
A)$54,000
B)$286,200
C)$486,000
D)$473,400

Accepted Answer

First, we need to determine the variable cost per unit.

At a production level of 5300 anchors, the average cost per anchor is $54.

Variable cost per unit = total cost at 5300 anchors / 5300 = $54

Total cost at 5300 anchors = $54 x 5300 = $286,200

To find the total cost at a production level of 9000 anchors, we can use the cost equation:

Total cost = fixed cost + (variable cost per unit x number of units)

Total cost = $18,000 + ($54 x 9000)

Total cost = $18,000 + $486,000

Total cost = $504,000

Therefore, the forecast for 9000 anchors will be $504,000.

The best choice is D.

Quiz 6: Cost Behavior

If a scatterplot reveals a fairly weak relationship between cost and volume, the manager should select a different activity for modeling cost behavior.

Outliers are abnormal data points.

When performing account analysis, managers decide how to classify each account as a variable, fixed or mixed cost.

If the data points in a scatter plot fall in a fairly straight line, it means that there is a fairly strong relationship between cost and volume.

George Company has a relevant range of 150,000 units to 400,000 units. The company has total fixed costs of $527,000. Total fixed and variable costs are $622,500 at a production level of 176,000 units. The variable cost per unit at 350,000 units is

Answer the following questions: a. What is a cost equation? b. If a company has fixed costs of $1,000 and variable costs of $4 per unit, what is their cost equation? c. What would a company use a cost equation for?

The following data pertain to costs at Massey Company: The fixed cost per unit is

At Dwight Incorporated, total fixed and variable costs are $420,000 at a production level of 130,000 units. The company has total fixed costs of $225,000. The variable cost per unit at 200,000 units is

A scatterplot helps managers visualize the relationship between historical costs and volume.

A scatterplot will help managers identify potential outliers.

If a scatterplot reveals a fairly weak relationship between cost and volume, the cost equation based on that data would not be very useful for predicting future costs.

Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5100 anchors, Sea Side Enterprises' average cost per anchor is $53 If $17,000 of the total costs are fixed, what is the variable cost of producing each anchor?

The following data pertain to costs at Massey Company: The variable cost per unit is

If there is little or no relationship between the cost and the volume, the data points on a scatterplot will appear almost as a straight line.

Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a production level of 5300 anchors, Sea Side Enterprises' average cost per anchor is $57. What is the total cost of producing 5300 anchors?

Outliers are data points that fall in the same general pattern as the other data points.

Rent on a factory building would likely be classified as a fixed cost.

At Dwight Incorporated, total fixed and variable costs are $410,000 at a production level of 120,000 units. The company has total fixed costs of $245,000. The fixed cost per unit at a production level of 200,000 units is