ACCTG 2600 CH. 3 HW / Quiz review

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Newco Inc. sells and installs clocks for $1,050 per clock. The following cost formula relates to last year's operations: Y= $120,000 + $600 X If Newco sold and installed 1,350 clocks last year, what was its revenue last year?

$1,417,500

Refer to Figure 7-9. What would the estimate of Freestyle Company's total lease cost be at a level of 520 machine hours?

$19,050

Quick Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. Production volume ........ 3,500 units 7,000 units Direct materials............ $42.50 per unit $42.50 per unit Direct Labor ............... $34.60 per unit $34.60 per unit Manufacturing overhead.. $83.40 per unit $55.30 per unit The best estimate of the total monthly fixed manufacturing cost is:

$196,700

Pizza Vesuvio makes specialty pizzas. Data for the past eight months were collected: Month Labor Cost Employee Hours January $7,000 360 February 8,140 550 March 9,899 630 April 9,787 610 May 8,490 480 June 7,450 350 July 9,490 570 August 7,531 310 Pizza Vesuvio's controller wants to calculate the fixed and variable costs associated with labor used in the restaurant. In your calculations, round the variable rate per employee hour to the nearest cent. Using the high-low method, calculate the fixed cost of labor.

$5,327 Low: $7531 ; 310 (go by hours) High: $9899 ; 630 (go by hours) Fixed Cost = Total - (Variable * Hours) Variable = (9899 - 7531) / (630-310) Fixed Cost = 9899 - (7.4 * 630)

Figure 7-9. Freestyle Company manufactures golf equipment. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected. Machine Month Lease cost Hours April $16,200 400 May 10,500 160 June 20,000 560 July 18,765 508 Refer to Figure 7-9. Using the high-low method calculate the fixed cost of leasing?

$6,700

Pizza Vesuvio makes specialty pizzas. Data for the past eight months were collected: Month Labor Cost Employee Hours January $7,000 360 February 8,140 550 March 9,899 630 April 9,787 610 May 8,490 480 June 7,450 350 July 9,490 570 August 7,531 310 Pizza Vesuvio's controller wants to calculate the fixed and variable costs associated with labor used in the restaurant. In your calculations, round the variable rate per employee hour to the nearest cent. Using the high-low method, calculate the variable rate.

$7.40 Variable = (9899-7531) / (630-310)

Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed but found that tanning salon costs increased with the number of appointments. Costs for this service over the past eight months are as follows: Month Tanning Appointments Total Cost January 1,600 $1,754 February 2,000 2,140 March 3,500 2,790 April 2,500 2,400 May 1,500 1,790 June 2,300 2,275 July 2,150 2,200 August 3,000 2,640 Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month. Round the variable rate per tanning appointment to the nearest cent.

.50 & 1040 (2790 - 1790) / (3500 - 1500) = 0.5 2790 - (.5 * 3500) = 1040

Longhorn Company incurred the following costs for the months of January and February. Type of Cost January February Rent $ 13,000 $ 13,000 Materials 7,500 15,000 Utilities 9,500 14,500 Depreciation 1,500 1,500 Refer to Figure 3-6. Assume that output was 8,500 units in January and 17,500 units in February, utility cost is a mixed cost, and the fixed cost of utilities was $4,625. What was the variable rate per unit of output for utilities cost?

.56

Which of the following would probably be a committed fixed cost for a manufacturing firm?

Advertising Expenses

The relevant range

Allows managerial accountants to assume a linear cost relationship Limits cost relationship to the range of operations normally Expected is the range of output where cost relationships are valid. ALL OF THESE ARE CORRECT

Discretionary fixed costs

Can be changed relatively easy at management discretion.

A factor that causes or leads to a change in a cost or activity is a(n)

Driver

Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed but found that tanning salon costs increased with the number of appointments. Costs for this service over the past eight months are as follows: Month Tanning Appointments Total Cost January 1,600 $1,754 February 2,000 2,140 March 3,500 2,790 April 2,500 2,400 May 1,500 1,790 June 2,300 2,275 July 2,150 2,200 August 3,000 2,640 Which month represents the high point? The low point?

High : March Low: May

The following six months of data were collected on maintenance cost and the number of machine hours in a factory: Month Maintenance Cost Machine Hours January $16,900 5,600 February 13,900 4,500 March 10,900 3,800 April 11,450 3,700 May 13,050 4,215 June 16,990 4,980 Select the correct set of high and low months.

High: January Low: April

The following cost formula for total purchasing cost in a factory was developed using monthly data. Total Cost = $235,000 + ($75 x Number of Purchase Orders) Next month, 8,000 purchase orders are predicted. The total cost predicted for the purchasing department next month

Is $835,000.

The following cost formula was developed by using monthly data for a hospital. Total Cost = $128,000,000 + ($12,000 x Number of Patient Days) In the cost formula, the term $128,000,000

Is the total fixed cost.

The following cost formula was developed by using monthly data for a hospital. Total Cost = $128,000,000 + ($12,000 x Number of Patient Days) In the cost formula, the term $12,000

Is the variable rate.

Refer to Figure 7-9. Which Month is the used for the high $ and high output in calculating the variable rate?

June

Calculate the total predicted cost of tanning services for September for 2,500 appointments using the cost formula found in Requirement 3. Of that total cost, how much is the total fixed cost for September? How much is the total predicted variable cost for September? In your calculations, round variable cost per unit to the nearest cent. If required, round the final answers to the nearest dollar.

Predicted September: 2290 Fixed Cost September: 1040 Total Predicted September: 1250

During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 18,000,000 Low 28,000 18,000,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 15,792,000 Low 28,000 11,504,000 Using the three cost formulas that you developed, predict the cost of each resource in a month with 36,000 airplane flight hours.

Total Cost Airplane Depreciation: 18,000,000 Total Cost of Fuel: 364,824,000 Total Cost of Maintenance: 13,648,000

During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 18,000,000 Low 28,000 18,000,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 15,792,000 Low 28,000 11,504,000 What is the cost formula for airplane depreciation?

Total Depreciation = 18,000,000

Pizza Vesuvio makes specialty pizzas. Data for the past eight months were collected: Month Labor Cost Employee Hours January $7,000 360 February 8,140 550 March 9,899 630 April 9,787 610 May 8,490 480 June 7,450 350 July 9,490 570 August 7,531 310 Pizza Vesuvio's controller wants to calculate the fixed and variable costs associated with labor used in the restaurant. In your calculations, round the variable rate per employee hour to the nearest cent. Using the high-low method, construct the cost formula for total labor cost.

Total Labor Cost = $5237 + ($7.40 * Hours)

During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 18,000,000 Low 28,000 18,000,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 15,792,000 Low 28,000 11,504,000 What is the cost formula for airplane maintenance?

Total cost of airplane maintenance = $4,000,000 + ( $268 × Number of airplane flight hours )

During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 18,000,000 Low 28,000 18,000,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 15,792,000 Low 28,000 11,504,000 What is the cost formula for fuel?

Total cost of fuel = $10,134 x Number of airplane flight hours

Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed but found that tanning salon costs increased with the number of appointments. Costs for this service over the past eight months are as follows: Month Tanning Appointments Total Cost January 1,600 $1,754 February 2,000 2,140 March 3,500 2,790 April 2,500 2,400 May 1,500 1,790 June 2,300 2,275 July 2,150 2,200 August 3,000 2,640 Using the variable rate and fixed cost, what is the cost formula for tanning services?

Total tanning service cost = $1,040 + ($0.50* Number of appointments)

If output increases by 50% and is still within the relevant range

Total variable costs will increase.

During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 18,000,000 Low 28,000 18,000,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 15,792,000 Low 28,000 11,504,000 What is the variable rate for airplane maintenance? What is the fixed cost for airplane maintenance?

Variable = 268/ Hour Airplane Fixed Maintenance = 4,000,000

During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 18,000,000 Low 28,000 18,000,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 15,792,000 Low 28,000 11,504,000 What is the variable rate for airplane depreciation? What is the fixed cost for airplane depreciation?

Variable Cost = 0 Fixed Cost = 18,000,000

During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 18,000,000 Low 28,000 18,000,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 15,792,000 Low 28,000 11,504,000 What is the variable rate for fuel? What is the fixed cost for fuel?

Variable Rate: $10,134 Fixed Cost: $0

Which of the following would probably be a variable cost in a soda bottling plant?

a. Direct labor b. Bottles c. Carbonated water d. Power to run the bottling machine ALL OF THESE ARE CORRECT


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