Section 2 Multiple Choice (60 marks) Please yellow highlight the entire line of the correct answer 1 Expense A is a fixed cost expense B is a variable cost During the current year, the activity level has increased but is still within the relevant range In terms of cost per unit of activity, you would expect which of the following statements to be true A Expense A has remained unchanged B Expense B has decreased C Expense A has decreased D Expense B has increased 2 Which costs will change with a decrease in activity within the relevant range A Total fixed costs and total variable costs B Unit fixed cost and total variable costs C Unit variable cost and unit fixed cost D Unit fixed cost and total fixed costs 3 Within the relevant range of activity, how will variable cost per unit behave A It will increase in proportion with the level of activity B It will remain constant C It will vary inversely with the level of activity D Its behaviour cannot be determined without additional information 4 What will result from an increase in the activity level within the relevant range A An increase in fixed cost per unit B A proportionate increase in total fixed costs C An unchanged fixed cost per unit D A decrease in fixed cost per unit 5 What does the term relevant range mean A The range within which costs may fluctuate B The range within which a particular cost formula is valid C The range within which production may vary D The range within which the relevant costs are incurred 6 The linear equation Y a bX is often used to express cost formulas Which of the following representations in this equation is correct A The b term represents variable cost per unit of activity B The a term represents variable cost in total C The X term represents total costs D The Y term represents total fixed costs 7 Which of the following is an example of a discretionary fixed cost A Insurance B Taxes on real estate C Management training D Amortization of buildings and equipment 8 Which of the following is an example of a committed fixed cost A A training program for salespersons B Executive travel expenses C Property taxes on the factory building D New product research and development 9 What are discretionary fixed costs A They vary directly and proportionately with the level of activity B They have a long term planning horizon, generally encompassing many years C They are made up of plant, equipment, and basic organizational costs D None of these options 10 In describing the cost formula equation Y a bX, which of the following statements is correct A The X term is the dependent variable B The a term is the fixed component C In the high low method, the b term equals change in activity divided by change in costs D As the X term increases, the Y term decreases 11 Which of the following best describes the contribution approach to the income statement A It organizes costs on a functional basis B It shows data based on the cost behavior aspect of fixed and variable C It shows a contribution margin rather than an operating income figure at the bottom of the statement D It can be used only by manufacturing companies 12 Contribution margin is the excess of revenues over which of the following A Cost of goods sold B Manufacturing cost C All direct costs D All variable costs 13 Which of the following is an example of a cost that is variable with respect to the number of units produced and sold A Insurance on the headquarters building B Power to run production equipment C Supervisory salaries D Amortization of factory facilities 14 What is a cost driver A It is the largest single category of cost in a company B It is a fixed cost that cannot be avoided C It is a factor that causes variations in a cost D It is an indirect cost that is essential to the business 15 The following data pertain to activity and costs for two months Assuming that these activity levels are within the relevant range, what were the mixed costs for November A $20,000 B $25,000 C $35,000 D $40,000 15 At an activity level of 10,000 units, total variable costs were $35,000 while total fixed costs were $20,800 If 16,000 units are produced and this activity is within the relevant range, which of the following statements is correct A Total costs would equal $89,280 B Total unit cost would equal $4 80 C Fixed cost per unit would equal $5 58 D Total costs would equal $55,800 16 Anaconda Mining Company shipped 9,000 tons of copper concentrate for $450,000 in March and 11,000 tons for $549,000 in April Use the high low method to estimate the shipping costs for 12,000 tons to be shipped in May A $548,780 B $549,020 C $594,000 D $598,500 17 An analysis of past maintenance costs indicates that maintenance cost is an average of $0 20 per machine hour at an activity level of 10,000 machine hours and $0 25 per machine hour at an activity level of 8,000 machine hours Assuming that this activity is within the relevant range, what is the total expected maintenance cost if the activity level is 8,700 machine hours A $400 B $1,740 C $2,000 D $2,250 18 Shipping expense is $9,000 for 8,000 kilograms shipped and $11,250 for 11,000 kilograms shipped Assuming that this activity is within the relevant range, if the company ships 9,000 kilograms, its expected shipping expense would be closest to which of the following A $8,583 B $9,750 C $9,972 D $10,125 19 Average maintenance costs are $1 50 per machine hour at an activity level of 8,000 machine hours and $1 20 per machine hour at an activity level of 13,000 machine hours Assuming that this activity is within the relevant range, total expected maintenance cost for a budgeted activity level of 10,000 machine hours would be closest to which of the following A $11,433 B $13,440 C $15,000 D $16,128 20 The controller of Joy Co has requested a quick estimate of the manufacturing supplies needed for July when production is expected to be 470,000 units Below are actual data from the prior three months of operations Using these data and the high low method, what is the best estimate of the cost of manufacturing supplies that would be needed for July (Assume that this activity is within the relevant range ) A $752,060 B $755,196 C $805,284 D $1,188,756 21 Which of the following concepts used in estimating cost behaviour is unique to the least squares regression method A Independent variable B Dependent variable C R squared D Variable cost per unit 22 Given the cost formula Y $15,000 $5X, what is the total cost at an activity level of 8,000 units A $15,000 B $23,000 C $40,000 D $55,000 23 Given the cost formula Y $12,000 $6X, what is the total cost at an activity level of 8,000 units A $12,000 B $20,000 C $48,000 D $60,000 24 Reddy Company has the following cost formulas for overhead Based on these cost formulas, what is the expected total overhead cost at 600 machine hours A $4,500 B $5,200 C $5,620 D $5,340 25 Given the cost formula Y $17,500 $4X, at what level of activity will total cost be $42,500 A 4,375 units B 5,250 units C 6,250 units D 10,625 units 26 The following data pertain to activity and utilities costs for two recent years Using the high low method, what is the variable cost per unit for utilities A $1 25 per unit B $1 50 per unit C $1 33 per unit D $0 75 per unit 27 The following data pertain to activity and utilities co Using the high low method, what is the cost formula for utilities A $1 20 per unit B $1 50 per unit C $3,000 plus $3 00 per unit D $4,500 plus $0 75 per unit 28 At an activity level of 6,000 units, the cost for maintenance is $7,200 at 10,000 units, the cost for maintenance is $11,600 Using the high low method, what is the cost formula for maintenance A $1 16 per unit B $1 20 per unit C $600 plus $1 10 per unit D $1,200 plus $1 10 per unit 29 Selected information about Buehler Corporation's operations at high and at low levels of activity follow Using the high low method, what is the total variable cost per unit of product A $11 05 B $21 00 C $32 00 D $35 00 30 At a sales level of $300,000, James Company's gross margin is $15,000 less than its contribution margin, its operating income is $50,000, and its total selling and administrative expenses are $120,000 At this sales level, what is the company's contribution margin A $155,000 B $170,000 C $185,000 D $250,000 31 Rymore Company would like to classify the following costs according to their cost behaviour Which of the following classifications best describes the behaviour of Cost A A Mixed B Variable C Fixed D Opportunity cost 32 Which of the following classifications best describes the behaviour of Cost B A Mixed B Variable C Fixed D Opportunity cost 33 Which of the following classifications best describes the behaviour of Cost C A Mixed B Variable C Fixed D Differential cost Use the information below to answer questions 34 to 36 Maxwell Company has a total expense per unit of $2 00 per unit at the 16,000 unit level of activity, and total expense per unit of $1 95 at the 21,000 unit level of activity 34 What is the best estimate of the variable cost per unit for Maxwell Company A $0 56 B $1 79 C $1 95 D $2 00 35 What is the best estimate of the total fixed cost per period for Maxwell Company A $3,360 C $32,000 D $40,950 36 What is the best estimate of the total expected costs at the 19,000 level of activity for Maxwell Company A $37,050 B $37,370 C $38,000 D $39,830 The following information has been provided by the Evans Retail Stores, Inc , for the first quarter of the year Use this information to answer Questions 37 and 38 37 What is the gross margin of Evans Retail Stores, Inc , for the first quarter A $140,000 B $190,000 C $210,000 D $220,000 38 What is the contribution margin of Evans Retail Stores, Inc , for the first quarter A $140,000 B $190,000 C $210,000 D $300,000 Prater Company has provided the following data Use this data to answer Questions 39 and 40 39 What is the best estimate of the company's variable operating expense per unit A $0 24 per unit B $0 91 per unit C $0 96 per unit D $4 17 per unit 40 What is the best estimate of the company's total fixed operating expense per year A $72,000 B $188,000 C $200,000 D $212,000

Question

Section 2 Multiple Choice (60 marks) Please yellow highlight the entire line of the correct answer  1  Expense A is a fixed cost  expense B is a variable cost  During the current year, the activity level has increased but is still within the relevant range  In terms of cost per unit of activity, you would expect which of the following statements to be true  A  Expense A has remained unchanged  B  Expense B has decreased  C  Expense A has decreased  D  Expense B has increased  2  Which costs will change with a decrease in activity within the relevant range  A  Total fixed costs and total variable costs  B  Unit fixed cost and total variable costs  C  Unit variable cost and unit fixed cost  D  Unit fixed cost and total fixed costs  3  Within the relevant range of activity, how will variable cost per unit behave  A  It will increase in proportion with the level of activity  B  It will remain constant  C  It will vary inversely with the level of activity  D  Its behaviour cannot be determined without additional information  4  What will result from an increase in the activity level within the relevant range  A  An increase in fixed cost per unit  B  A proportionate increase in total fixed costs  C  An unchanged fixed cost per unit  D  A decrease in fixed cost per unit  5  What does the term  relevant range  mean  A  The range within which costs may fluctuate  B  The range within which a particular cost formula is valid  C  The range within which production may vary  D  The range within which the relevant costs are incurred  6  The linear equation Y   a   bX is often used to express cost formulas  Which of the following representations in this equation is correct  A  The b term represents variable cost per unit of activity  B  The a term represents variable cost in total  C  The X term represents total costs  D  The Y term represents total fixed costs  7  Which of the following is an example of a discretionary fixed cost  A  Insurance  B  Taxes on real estate  C  Management training  D  Amortization of buildings and equipment  8  Which of the following is an example of a committed fixed cost  A  A training program for salespersons  B  Executive travel expenses  C  Property taxes on the factory building  D  New product research and development  9  What are discretionary fixed costs  A  They vary directly and proportionately with the level of activity  B  They have a long term planning horizon, generally encompassing many years  C  They are made up of plant, equipment, and basic organizational costs  D  None of these options  10  In describing the cost formula equation Y   a   bX, which of the following statements is correct  A  The X term is the dependent variable  B  The a term is the fixed component  C  In the high low method, the b term equals change in activity divided by change in costs  D  As the X term increases, the Y term decreases  11  Which of the following best describes the contribution approach to the income statement  A  It organizes costs on a functional basis  B  It shows data based on the cost behavior aspect of fixed and variable  C  It shows a contribution margin rather than an operating income figure at the bottom of the statement  D  It can be used only by manufacturing companies  12  Contribution margin is the excess of revenues over which of the following  A  Cost of goods sold  B  Manufacturing cost  C  All direct costs  D  All variable costs  13  Which of the following is an example of a cost that is variable with respect to the number of units produced and sold  A  Insurance on the headquarters building  B  Power to run production equipment  C  Supervisory salaries  D  Amortization of factory facilities  14  What is a cost driver  A  It is the largest single category of cost in a company  B  It is a fixed cost that cannot be avoided  C  It is a factor that causes variations in a cost  D  It is an indirect cost that is essential to the business 15  The following data pertain to activity and costs for two months  Assuming that these activity levels are within the relevant range, what were the mixed costs for November  A  $20,000  B  $25,000  C  $35,000  D  $40,000  15  At an activity level of 10,000 units, total variable costs were $35,000 while total fixed costs were $20,800  If 16,000 units are produced and this activity is within the relevant range, which of the following statements is correct  A  Total costs would equal $89,280  B  Total unit cost would equal $4 80  C  Fixed cost per unit would equal $5 58  D  Total costs would equal $55,800  16  Anaconda Mining Company shipped 9,000 tons of copper concentrate for $450,000 in March and 11,000 tons for $549,000 in April  Use the high low method to estimate the shipping costs for 12,000 tons to be shipped in May  A  $548,780  B  $549,020  C  $594,000  D  $598,500  17  An analysis of past maintenance costs indicates that maintenance cost is an average of $0 20 per machine hour at an activity level of 10,000 machine hours and $0 25 per machine hour at an activity level of 8,000 machine hours  Assuming that this activity is within the relevant range, what is the total expected maintenance cost if the activity level is 8,700 machine hours  A  $400  B  $1,740  C  $2,000  D  $2,250  18  Shipping expense is $9,000 for 8,000 kilograms shipped and $11,250 for 11,000 kilograms shipped  Assuming that this activity is within the relevant range, if the company ships 9,000 kilograms, its expected shipping expense would be closest to which of the following  A  $8,583  B  $9,750  C  $9,972  D  $10,125  19  Average maintenance costs are $1 50 per machine hour at an activity level of 8,000 machine hours and $1 20 per machine hour at an activity level of 13,000 machine hours  Assuming that this activity is within the relevant range, total expected maintenance cost for a budgeted activity level of 10,000 machine hours would be closest to which of the following  A  $11,433  B  $13,440  C  $15,000  D  $16,128  20  The controller of Joy Co has requested a quick estimate of the manufacturing supplies needed for July when production is expected to be 470,000 units  Below are actual data from the prior three months of operations  Using these data and the high low method, what is the best estimate of the cost of manufacturing supplies that would be needed for July  (Assume that this activity is within the relevant range ) A  $752,060  B  $755,196  C  $805,284  D  $1,188,756  21  Which of the following concepts used in estimating cost behaviour is unique to the least squares regression method  A  Independent variable  B  Dependent variable  C  R squared  D  Variable cost per unit  22  Given the cost formula Y   $15,000   $5X, what is the total cost at an activity level of 8,000 units  A  $15,000  B  $23,000  C  $40,000  D  $55,000  23  Given the cost formula Y   $12,000   $6X, what is the total cost at an activity level of 8,000 units  A  $12,000  B  $20,000  C  $48,000  D  $60,000  24  Reddy Company has the following cost formulas for overhead  Based on these cost formulas, what is the expected total overhead cost at 600 machine hours  A  $4,500  B  $5,200  C  $5,620  D  $5,340  25  Given the cost formula Y   $17,500   $4X, at what level of activity will total cost be $42,500  A  4,375 units  B  5,250 units  C  6,250 units  D  10,625 units  26  The following data pertain to activity and utilities costs for two recent years  Using the high low method, what is the variable cost per unit for utilities  A  $1 25 per unit  B  $1 50 per unit  C  $1 33 per unit D  $0 75 per unit  27  The following data pertain to activity and utilities co Using the high low method, what is the cost formula for utilities  A  $1 20 per unit  B  $1 50 per unit  C  $3,000 plus $3 00 per unit  D  $4,500 plus $0 75 per unit  28  At an activity level of 6,000 units, the cost for maintenance is $7,200  at 10,000 units, the cost for maintenance is $11,600  Using the high low method, what is the cost formula for maintenance  A  $1 16 per unit  B  $1 20 per unit  C  $600 plus $1 10 per unit  D  $1,200 plus $1 10 per unit  29  Selected information about Buehler Corporation's operations at high and at low levels of activity follow  Using the high low method, what is the total variable cost per unit of product  A  $11 05  B  $21 00  C  $32 00  D  $35 00 30  At a sales level of $300,000, James Company's gross margin is $15,000 less than its contribution margin, its operating income is $50,000, and its total selling and administrative expenses are $120,000  At this sales level, what is the company's contribution margin  A  $155,000  B  $170,000  C  $185,000  D  $250,000  31  Rymore Company would like to classify the following costs according to their cost behaviour  Which of the following classifications best describes the behaviour of Cost A  A  Mixed  B  Variable  C  Fixed  D  Opportunity cost  32  Which of the following classifications best describes the behaviour of Cost B  A  Mixed  B  Variable  C  Fixed  D  Opportunity cost  33  Which of the following classifications best describes the behaviour of Cost C  A  Mixed  B  Variable  C  Fixed  D  Differential cost  Use the information below to answer questions 34 to 36  Maxwell Company has a total expense per unit of $2 00 per unit at the 16,000 unit level of activity, and total expense per unit of $1 95 at the 21,000 unit level of activity  34  What is the best estimate of the variable cost per unit for Maxwell Company  A  $0 56  B  $1 79  C  $1 95  D  $2 00  35  What is the best estimate of the total fixed cost per period for Maxwell Company  A  $3,360  C  $32,000 D  $40,950  36  What is the best estimate of the total expected costs at the 19,000 level of activity for Maxwell Company  A  $37,050  B  $37,370  C  $38,000  D  $39,830  The following information has been provided by the Evans Retail Stores, Inc , for the first quarter of the year  Use this information to answer Questions 37 and 38  37  What is the gross margin of Evans Retail Stores, Inc , for the first quarter  A  $140,000  B  $190,000  C  $210,000  D  $220,000  38  What is the contribution margin of Evans Retail Stores, Inc , for the first quarter  A  $140,000  B  $190,000  C  $210,000  D  $300,000  Prater Company has provided the following data  Use this data to answer Questions 39 and 40  39  What is the best estimate of the company's variable operating expense per unit  A  $0 24 per unit  B  $0 91 per unit  C  $0 96 per unit  D  $4 17 per unit  40  What is the best estimate of the company's total fixed operating expense per year  A  $72,000  B  $188,000  C  $200,000  D  $212,000

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Section 2 Multiple Choice (60 marks) Please yellow-highlight the entire line of the correct answer. 1. Expense A is a fixed cost; expense B is

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