1. Thomas Train has collected the following
information over the last six months.
Month Units
produced Total
costs
March 10,000
$25,600
April 12,000
26,200
May 18,400
29,200
June 13,000
26,450
July 12,000
26,000
August 15,000
26,500
Using the high-low method, what is the
variable cost per unit?
2. Rooter’s Cleaning Services provided data
concerning the costs incurred to clean hotel rooms for which hotel customers
pay $150 per night. Data for the past 7 months are as follows:
|
January |
February |
March |
April |
May |
June |
July |
|
|
Number |
250.00 |
160.00 |
200.00 |
150.00 |
300.00 |
170.00 |
260.00 |
|
Cleaning |
$6,450 |
$4,060 |
$5,100 |
$4,100 |
$6,640 |
$4,200 |
$6,530 |
How much are estimated monthly variable costs
using the high-low method?
3. A cost is $3,600 at 1,000 units, $7,000 at
2,000 units, and $9,200 at 3,000 units. This cost is a:
a. mixed cost
b. step cost
c. variable cost
d. fixed cost
4. Winny’s Office Furniture has a contribution margin ratio
of 16%. If fixed costs are $188,800, how many dollars of revenue must the
company generate in order to reach the break-even point?
5. Tim Taylor has written a self-improvement
book that has the following cost characteristics:
Selling Price $16.00 per book
Variable cost per unit:
Production $4.00
Selling & administrative 2.00
Fixed costs:
Production $93,600
per year
Selling & administrative 29,400
per year
How many units must be sold to break-even?
6. The use of fixed cost to increase profits at
a rate faster than sales increase is called:
7. Assume Sparkle Co. expects to sell 150 units
next month. The unit sales price is $90, unit variable cost is $45, and the
fixed costs per month are $5,000. The margin of safety is:
8. Which of the following statements about the
relevant range is true?
a.
Cost
functions outside the relevant range are usually linear
b.
The
relevant range is the normal length of time in a company’s accounting period
c.
Estimates
outside the relevant range are useful
d.
Cost
functions within the relevant range are assumed to be linear
