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Click to watch the Concept Clip Absorption and Variable Costing Income Statements video and then answer each of the questions below by selecting True or False 1. If ending inventory increases, absorption costing income will be higher than variable costing income. v 2. If ending inventory decreases, absorption costing income will be lower than variable costing income. v Click to watch the Concept Clip The Basics of Cost Behavior video and then answer each of the questions below by selecting True or False 1. Cost behavior is the general term for describing whether and how a cost changes when the level of output changes. v 2. If Jeanette's Good Times Diner paid for social media advertising based on how many \"likes\" their pages received each week, it would be a xed cost because it is not related to the number of burgers sold each week. V Click to watch the Concept Clip General Methods for Separating Mixed Costs into Fixed and Variable Components video and then answer each of the questions below by selecting True or False 1. The high-low method is quick and inexpensive to perform, easy to explain to decision makers, and creates the most accurate estimates possible for variable costs and xed costs. 2. One disadvantage of the method of lead squares (regression) is that the cost formula may be different depending on which number is used from a given set of data. v Creating and Using a Cost Formula Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $14,900 on its plant equipment. Also, each drive requires materials and manufacturing overhead resources. On average, the company uses 15,000 ounces of materials to manufacture 7,500 flash drives per month. Each ounce of material costs $3.00. In addition, manufacturing overhead resources are driven by machine hours. On average, the company incurs $37,500 of variable manufacturing overhead resources to produce 7,500 flash drives per month. In your calculations, round variable rate per flash drive to the nearest cent. If required, round final answers to the nearest cent. Required: 1. Create a formula for the monthly cost of ash drives for Big Thumbs. Total cost of ash drives V + ( V x Number of flash drives) Total cost of ash drives = $:] + ($:] x Number of ash drives) 2. If the department expects to manufacture 6,000 ash drives next month, what is the expected fixed cost (assume that 6,000 units is within the company's current relevant range)? $:l What is the total variable cost (assume that 6,000 units is within the company's current relevant range)? $:l What is the total manufacturing cost (i.e., both xed and variable) (assume that 6,000 units is within the company's current relevant range)? 35:] Using High-Low to Calculate Predicted Total Variable Cost and Total Cost for a Time Period that Differs from the Data Period Pizza Vesuvio makes specialty pizzas. Data for the past 8 months were collected: Month Labor Cost Employee Hours January $7,300 410 February 10,199 600 March 8,440 720 April 10,087 660 May 8,790 530 June 7,831 400 July 9,790 620 August 7,750 360 Assume that this information was used to construct the following formula for monthly labor cost. Total Labor Cost = $7,059 + ($1.92 X Employee Hours) Required: Assume that 3,900 employee hours are budgeted for the coming year. Use the total labor cost formula to make the following calculations: 1. Calculate total variable labor cost for the coming year. Round your answer to the nearest dollar. 55:] 2. Calculate total fixed labor cost for the coming year. Round your answer to the nearest dollar. $:] 3. Calculate total labor cost for the coming year. Round your answer to the nearest dollar. 35:]
