Question 1

Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 150,000 units.The variable cost per unit at 300,000 units is:
A)the same as at 150,000 units.
B)greater than at 150,000 units.
C)less than at 150,000 units.
D)dependent upon fixed costs per unit.

Accepted Answer

The variable cost per unit is calculated by subtracting the total fixed cost from the total cost at a specific production level and then dividing by the number of units produced at that level. Since the fixed costs do not change between production levels, the variable cost per unit at 300,000 units is the same as at 150,000 units, which is ($600,000 - $480,000) ÷ 150,000 = $1.20 per unit.

Question 2

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.What is the total cost of producing 4,000 anchors?
A)$ 80
B)$4,050
C)$ 50
D)$200,000

Accepted Answer

The total cost of producing 4,000 anchors is calculated by multiplying the average cost per anchor ($50.00) by the number of anchors (4,000), which equals $200,000.

Question 3

The following data pertain to costs at Martin Company: $$\begin{array} { | l | c | } 
\hline \text { Total fixed costs } & \$ 250,000 \
\hline \text { Total variable costs } & \$ 80,000 \
\hline \text { Production level } & 40,000 \text { units } \
\hline
\end{array}$$ 
-The fixed cost per unit is:
A)$6.25.
B)$8.25.
C)$4.25.
D)$2.00.

Accepted Answer

Fixed cost per unit = Total fixed costs / Production level = $250,000 / 40,000 units = $6.25 per unit.

Question 4

Answer the following questions:
a.What is a cost equation?
b.If a company has fixed costs of $1,000 and variable costs of $2 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 5

The controller for Truman Canoes has gathered the following cost and activity level information:
 $$\begin{array} { | l | r | } 
\hline \text { Average total cost per unit } & \$ 300.00 \
\hline \text { Production level used to calculate average cost } & 2,000 \
\hline \text { Total fixed costs } & \$ 100,000 \
\hline
\end{array}$$ a.What is the total cost of producing 2,000 fiberglass canoes?
b.What is the variable cost of producing each fiberglass canoe?
c.Suppose the controller uses the average cost to predict total costs.What total cost would the controller calculate for 3,000 fiberglass canoes?
d.If the controller uses the cost equation to predict total costs,what total cost would the controller calculate for 3,000 fiberglass canoes?
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 Truman Canoes has...

Question 6

A scatter plot will not help managers identify potential outliers.

Accepted Answer

A scatter plot can indeed help managers identify potential outliers, as these would be data points that fall further away from the general trend or cluster of the other data points. Hence, the statement is false.

Question 7

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.If $20,000 of the total costs are fixed,what is the variable cost of producing each anchor?
A)$ 5
B)$ 50
C)$ 45
D)$180,000

Accepted Answer

The total cost for 4,000 anchors is 4,000 * $50 = $200,000. With $20,000 being fixed costs, the variable costs are $200,000 - $20,000 = $180,000. The variable cost per anchor is $180,000 / 4,000 = $45.

Question 8

If a scatter plot reveals a fairly weak relationship between cost and volume,the cost equation based on that data should be very useful for predicting future costs.

Accepted Answer

If there is a weak relationship between cost and volume, then the cost equation may not accurately predict future costs. In such a case, other factors may need to be considered to improve the accuracy of cost predictions.

Question 9

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.If $20,000 of the costs are fixed,and the plant manager uses the cost equation to predict total costs,her forecast for 5,000 anchors will be:
A)$ 50,000.
B)$245,000.
C)$250,000.
D)$200,000.

Accepted Answer

The answer of  Harbor Manufacturing is trying to predict...

Question 10

If there is little or no relationship between the cost and volume,the data points on a scatter plot will appear almost random.

Accepted Answer

When there is little or no relationship between the cost and volume, the data points on a scatter plot will appear scattered and not following any pattern, giving the appearance of randomness. Therefore, Option A is correct, and Option B is false.

Question 11

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

Accepted Answer

A scatter plot is a graphical representation of data points where the values for two different variables are plotted along the horizontal and vertical axis. It is commonly used to visualize the relationship between two variables, such as historical costs and volume.

Question 12

At Raines Company,total fixed and variable costs are $480,000 at a production level of 140,000 units.The company has total fixed costs of $200,000.The variable cost per unit at 200,000 units is:
A)$1.43.
B)$2.00.
C)$3.43.
D)$1.40.

Accepted Answer

The answer of  At Raines Company,total fixed and variable...

Question 13

At Raines Company,total fixed and variable costs are $480,000 at a production level of 140,000 units.The company has total fixed costs of $200,000.The fixed cost per unit at a production level of 200,000 units is:
A)$3.43.
B)$2.40.
C)$1.00.
D)$1.43.

Accepted Answer

Fixed costs remain constant regardless of production level. Therefore, the fixed cost per unit at 200,000 units is $200,000 / 200,000 units = $1.00.

Question 14

The following data pertain to costs at Martin Company: $$\begin{array} { | l | c | } 
\hline \text { Total fixed costs } & \$ 250,000 \
\hline \text { Total variable costs } & \$ 80,000 \
\hline \text { Production level } & 40,000 \text { units } \
\hline
\end{array}$$
- The variable cost per unit is:
A)$6.25.
B)$8.25.
C)$4.25.
D)$2.00.

Accepted Answer

The variable cost per unit is calculated by dividing the total variable costs by the production level: $80,000 / 40,000 = $2.00.

Question 15

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

Accepted Answer

If the data points in a scatter plot fall in a fairly straight line, it means that there is a strong relationship between cost and volume, not a weak one. A weak relationship would result in scattered and dispersed data points.

Question 16

Indirect materials would likely be classified as fixed costs.

Accepted Answer

Indirect materials are typically classified as variable costs since they vary based on production levels. Fixed costs are expenses that do not vary with production levels, such as rent, salaries, and insurance.

Question 17

Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 125,000 units.The fixed cost per unit at a production level of 300,000 units is:
A)$4.00.
B)$3.20.
C)$2.00.
D)$1.60.

Accepted Answer

The answer of  Pedro Company has total fixed costs...

Question 18

Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 150,000 units.The variable cost per unit at 300,000 units is:
A)$4.00.
B)$0.80.
C)$0.40.
D)$3.20.

Accepted Answer

The answer of  Pedro Company has total fixed costs...

Question 19

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.If $20,000 of the costs are fixed,and the plant manager uses the average cost per unit to predict total costs,her forecast for 5,000 anchors will be:
A)$250,000.
B)$245,000.
C)$200,000.
D)$ 50,000.

Accepted Answer

The average cost per anchor at 4,000 units is $50, which includes both fixed and variable costs. Total cost at 4,000 units is $50 x 4,000 = $200,000. Since $20,000 of these are fixed costs, the variable cost is $180,000. The variable cost per anchor is $180,000 / 4,000 = $45. For 5,000 anchors, total cost = fixed costs + (variable cost per anchor x 5,000) = $20,000 + ($45 x 5,000) = $245,000. However, if the manager uses the average cost per unit ($50) to predict costs, she would calculate $50 x 5,000 = $250,000.

Question 20

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

Accepted Answer

Managers use account analysis to determine the nature of each account and classify them as variable, fixed, or mixed costs based on their behavior in relation to changes in production or sales volume. This allows them to perform more accurate cost analysis and make informed decisions about pricing, budgeting, and profitability.

Quiz 6: Cost Behavior

Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 150,000 units.The variable cost per unit at 300,000 units is:

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.What is the total cost of producing 4,000 anchors?

The following data pertain to costs at Martin Company: $\begin{array} { | l | c | } \hline \text { Total fixed costs } & \$ 250,000 \\\hline \text { Total variable costs } & \$ 80,000 \\\hline \text { Production level } & 40,000 \text { units } \\\hline\end{array}$ -The fixed cost per unit 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 $2 per unit,what is their cost equation? c.What would a company use a cost equation for?

A scatter plot will not help managers identify potential outliers.

Harbor Manufacturing is trying to predict the cost associated with producing its anchors.At a production level of 4,000 anchors,Harbor Manufacturing's average cost per anchor is $50.00.If $20,000 of the total costs are fixed,what is the variable cost of producing each anchor?

If a scatter plot reveals a fairly weak relationship between cost and volume,the cost equation based on that data should be very useful for predicting future costs.

If there is little or no relationship between the cost and volume,the data points on a scatter plot will appear almost random.

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

At Raines Company,total fixed and variable costs are $480,000 at a production level of 140,000 units.The company has total fixed costs of $200,000.The variable cost per unit at 200,000 units is:

At Raines Company,total fixed and variable costs are $480,000 at a production level of 140,000 units.The company has total fixed costs of $200,000.The fixed cost per unit at a production level of 200,000 units is:

The following data pertain to costs at Martin Company: $\begin{array} { | l | c | } \hline \text { Total fixed costs } & \$ 250,000 \\\hline \text { Total variable costs } & \$ 80,000 \\\hline \text { Production level } & 40,000 \text { units } \\\hline\end{array}$ - The variable cost per unit is:

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

Indirect materials would likely be classified as fixed costs.

Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 125,000 units.The fixed cost per unit at a production level of 300,000 units is:

Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 150,000 units.The variable cost per unit at 300,000 units is:

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