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Exam 3: Cost Behavior

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Question 81

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Harnow Company manufactures drill presses. Based on past experience, Harnow has found that its total overhead cost can be represented by the following formula: Total overhead cost = $35,500 + $1.25x, where x = number of machine hours. Last year Harnow incurred 120,000 machine hours. Required:

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Question 82

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Figure 3-5.Maxwell Company makes treadmills. The company controller wants to calculate the fixed and variable costs associated with the janitorial costs incurred in the factory. Data for the past four months were collected. -Refer to Figure 3-5. Using the high-low method calculate the fixed cost of the janitorial services

A) $4,080
B) $7,320
C) $6,120
D) none of these are correct

E) A) and B)
F) C) and D)

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Question 83

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A variable cost increases in total when output increases but the per-unit costs remains the same.

Figure 3-1.Total cost = Fixed cost + (Variable Rate * Output) -Refer to Figure 3-1. In the cost formula above which element would be the independent variable?

Depreciation on factory equipment would be an example of a _________.

Select the appropriate item for each of the definitions listed below. -total cost depends on the level of output

The ________________________ is a variable whose value depends on the value of another variable.

Select the appropriate cost behavior for each of the costs listed below. -cost of lubricating machinery

Figure 3-10.The following cost formula was developed using the monthly data for an accounting firm.Total cost = $87,100 + ($210 * number of tax returns) -Refer to Figure 3-10. The term "number of tax returns"

Mixed costs have both a fixed and a variable component.

The slope of a mixed cost line is equal to the fixed element of the cost.

___________________ are costs that in total vary in direct proportion to changes in output within the relevant range.

Figure 3-6.Taran Company incurred the following costs for the months of January and February. -Refer to Figure 3-6. Assume that output was 5,000 units in January and 10,000 units in February, utility cost is a mixed cost, and the fixed cost of utilities was $3,000. What was the variable rate per unit of output for utilities cost?

Spangle Company constructed the following cost formula for its monthly maintenance cost. Total monthly maintenance cost = $9,000 + ($1.75 * no. machine hours) Required:

Select the appropriate item for each of the definitions listed below. -a factor that causes a change in cost or activity

Cost behavior analysis focuses on

Figure 3-1.Total cost = Fixed cost + (Variable Rate * Output) -Refer to Figure 3-1. In the cost formula above which element would be the intercept?

A type of cost behavior where the true total cost function is increasing at a decreasing rate is called ______________.

Select the appropriate item for each of the definitions listed below. -it corresponds to the variable rate

Why is it necessary to separate a mixed cost into its variable and fixed components?