Question 1

Franco Company has variable costs of $0.65 per unit of product.In October,the volume of production was 24,000 units and units sold were 23,000.The total production costs incurred were $32,200.What are the fixed costs per month?

Accepted Answer

A)
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Question 2

Grimes Company incurred fixed costs of $310,000.Total costs,both fixed and variable,are $480,000 when 50,000 units are produced.It sold 40,000 units during the year.Calculate the variable cost per unit.

Accepted Answer

D)
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Question 3

Which of the following costs remains the same irrespective of the changes in production?

Accepted Answer

Total fixed costs do not change with changes in production levels, as they are not dependent on any variable factors such as sales volume or production output. Fixed costs include expenses such as rent, property taxes, and salaries of permanent employees.

Question 4

The high-low method is used to ________.

Accepted Answer

The high-low method is a cost analysis technique used to separate mixed costs into their variable and fixed components. It involves identifying the highest and lowest levels of activity and the total costs associated with each level. The difference in costs between these two levels is the variable cost, and the fixed cost can be calculated by subtracting total variable costs from total costs at either level. Therefore, option B is the correct choice.

Question 5

Hooper Business Machines provided the following manufacturing costs for the month of March. $$\begin{array} { | l | r | } 
\hline \text { Direct labor cost } & \$ 140,000 \
\hline \text { Direct materials cost } & 85,000 \
\hline \text { Equipment depreciation (straight-line) } & 28,000 \
\hline \text { Factory insurance } & 21,000 \
\hline \text { Factory manager's salary } & 13,000 \
\hline \text { Janitor's salary } & 5,100 \
\hline \text { Packaging costs } & 18,800 \
\hline \text { Property taxes } & 16,300 \
\hline
\end{array}$$ From the above information,calculate Hooper's total fixed costs.

Accepted Answer

Fixed costs are those that do not change with the level of production or sales, and include equipment depreciation, factory insurance, factory manager's salary, and property taxes, totaling $28,000 + $21,000 + $13,000 + $16,300 = $78,300. However, the correct calculation should be $28,000 (Equipment depreciation) + $21,000 (Factory insurance) + $13,000 (Factory manager's salary) + $5,100 (Janitor's salary) + $16,300 (Property taxes) = $83,400. The inclusion of the janitor's salary as a fixed cost was overlooked in the initial response. Fixed costs remain constant regardless of the company's level of production, which includes salaries of permanent employees like janitors, making the correct total fixed costs $83,400.

Question 6

Haywood Company has fixed costs of $30,000 per month.Highest production volume during the year was in January when 110,000 units were produced,90,000 units were sold,and total costs of $650,000 were incurred.In June,the company produced only 60,000 units.What was the total cost incurred in June?

Accepted Answer

B)
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Question 7

Mendoza Company's highest point of total cost was $85,000 in June.Their point of lowest cost was $60,000 in January.The company makes a single product.Production volume in June was 14,000 units; production volume in January was 8,000 units.What is the variable cost per unit?

Accepted Answer

C) Variable cost per unit = Change in total cost / Change in volume of activity
Variable cost per unit = (Highest cost - Lowest cost) / (Highest volume - Lowest volume)
Variable cost per unit = ($85,000 - $60,000) / (14,000 - 8,000) = $25,000 / 6,000
Variable cost per unit = $4.17 per unit

Question 8

Dayton Company has fixed costs of $350,000.Total costs,both fixed and variable,are $450,000 when 40,000 units are produced.Calculate the total costs if the volume increases to 65,000 units.Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.

Accepted Answer

C)
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Question 9

Costs that have both variable and fixed components are called ________.

Accepted Answer

Mixed costs have both variable and fixed components. Fixed costs remain constant whereas variable costs change with the level of production or sales. Mixed costs are also known as semi-variable costs. Option A is incorrect because fixed costs do not have variable components. Option B is incorrect because variable costs do not have fixed components. Option D is not a recognized term in cost accounting.

Question 10

The phone bill for Ace Accounting consists of both fixed and variable costs.Refer to the four month data below and apply the high-low method to answer the question.(Round your intermediate calculations to two decimal places.) $$\begin{array} { | l | r | r | } 
\hline & \text { Minutes } & \text { Total Bill } \
\hline \text { May } & 480 & \$ 3,400 \
\hline \text { June } & 210 & \$ 2,680 \
\hline \text { July } & 175 & \$ 2,650 \
\hline \text { August } & 330 & \$ 2,875 \
\hline
\end{array}$$ What is the fixed portion of the total cost?

Accepted Answer

The answer of The phone bill for Ace Accounting consists...

Question 11

Kelley Business Machines provided the following manufacturing costs for the month of March. $$\begin{array} { | l | r | } 
\hline \text { Direct labor cost } & \$ 140,000 \
\hline \text { Direct materials cost } & 85,000 \
\hline \text { Equipment depreciation (straight-line) } & 25,000 \
\hline \text { Factory insurance } & 20,000 \
\hline \text { Factory manager's salary } & 13,300 \
\hline \text { Janitor's salary } & 5,500 \
\hline \text { Packaging costs } & 18,800 \
\hline \text { Property taxes } & 16,100 \
\hline
\end{array}$$ From the above information,calculate Kelley's total variable costs.Round any intermediate calculations to two decimal places,and your final answer to the nearest dollar.

Accepted Answer

The answer of Kelley Business Machines provided the following manufacturing...

Question 12

Which of the following costs changes in total in direct proportion to a change in volume?

Accepted Answer

Variable costs change proportionally with changes in volume. As volume increases, variable costs also increase, and as volume decreases, variable costs also decrease. Fixed costs (A) remain constant regardless of changes in volume, while mixed costs (C) change but not in direct proportion to changes in volume as they contain both fixed and variable components. Period costs (D) are not related to changes in volume but are expensed in the period in which they are incurred.

Question 13

Mendoza Company's highest point of total cost was $80,000 in June.Their point of lowest cost was $65,000 in January.The company makes a single product.Production volume in June and January were 16,000 and 8,000 units,respectively.What is the fixed cost per month?

Accepted Answer

C) Variable cost per unit = Change in total cost / Change in volume of activity
Variable cost per unit = (Highest cost - Lowest cost) / (Highest volume - Lowest volume)
 11ea8870_3610_3d69_bb89_99b15f0c2c46_TB5025_00 Total costs for June
Total variable costs for June
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Question 14

Pfeiffer Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 25%,then the total costs would ________.

Accepted Answer

Since Pfeiffer Company has both fixed and variable production costs, as production volume increases, the variable costs will increase proportionately while the fixed costs remain constant. Therefore, the total costs would increase by an amount less than 25%.

Question 15

Which of the following costs does not change in total despite changes in volume?

Accepted Answer

Fixed cost is a cost that remains constant in total regardless of changes in volume, such as rent or salaries. Variable costs, on the other hand, increase or decrease with changes in activity, and mixed costs have both fixed and variable components. Total production cost is the sum of both fixed and variable costs, therefore it will change with changes in volume.

Question 16

Patel Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 15%,then the total fixed costs would ________.

Accepted Answer

Fixed costs remain constant within the relevant range, therefore, they would not change with a 15% increase in production volume.

Question 17

The relevant range of Zhang Company is between 110,000 units and 190,000 units per month.If the company produces beyond 190,000 units per month ________.

Accepted Answer

If the company produces beyond the relevant range of 110,000 to 190,000 units per month, both the fixed costs and the variable cost per unit may change. Fixed costs may increase if additional equipment, space or personnel are required to accommodate the increased production, while variable costs may increase due to bulk purchase of raw materials, production inefficiencies or maintenance costs. Therefore, option D is the best choice.

Question 18

The phone bill for Laurel Accounting consists of both fixed and variable costs.Refer to the four month data below and apply the high-low method to answer the question.(Round your calculation to two decimal places.) $$\begin{array} { | l | r | r | } 
\hline & \text { Minutes } & \text { Total Bill } \
\hline \text { May } & 480 & \$ 3,000 \
\hline \text { June } & 240 & \$ 2,675 \
\hline \text { July } & 160 & \$ 2,640 \
\hline \text { August } & 320 & \$ 2,880 \
\hline
\end{array}$$ What is the variable cost per minute?

Accepted Answer

The variable cost per minute is calculated as the difference between the highest and lowest total bills divided by the difference between the highest and lowest minutes. In this case, the highest total bill is $3,000 and the lowest total bill is $2,640. The highest minutes is 480 and the lowest minutes is 160. Therefore, the variable cost per minute is ($3,000 - $2,640) / (480 - 160) = $360 / 320 = $1.13.

Question 19

The phone bill for a law firm consists of both fixed and variable costs.Refer to the four month data below and apply the high-low method to answer the question. $$\begin{array} { | l | r | r | } 
\hline & \text { Minutes } & \text { Total Bill } \
\hline \text { May } & 490 & \$ 3,200 \
\hline \text { June } & 210 & \$ 2,700 \
\hline \text { July } & 160 & \$ 2,650 \
\hline \text { August } & 330 & \$ 2,800 \
\hline
\end{array}$$ If the company uses 390 minutes in September,how much will the total bill be? (Round your intermediate calculations to two decimal places.)

Accepted Answer

Using the high-low method, the variable cost per minute is calculated as (3200 - 2650) / (490 - 160) = 1.67. The fixed cost is then calculated using either the high or low point: 3200 - (490 * 1.67) = 1,384.70. For 390 minutes, the total bill is 1,384.70 + (390 * 1.67) = 3,033.00.

Question 20

Patel Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 15%,then the total variable costs would ________.

Accepted Answer

Variable costs change in direct proportion to changes in volume. Therefore, if volume increases by 15%, total variable costs would also increase by 15%. Fixed costs, on the other hand, would remain unchanged within the relevant range.

Quiz 21: Cost-Volume-Profit Analysis