ACC 211 Final Ch 3

Mahogany Company manufactures computer keyboards. The total cost of producing 12,000 keyboards is $346,000. The total fixed cost amounts to $130,000. Determine the total cost of manufacturing 26,000 keyboards.
a.$720,000
b.$562,000
c.$598,000
d.$468,000
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Mahogany Company manufactures computer keyboards. The total cost of producing 12,000 keyboards is $346,000. The total fixed cost amounts to $130,000. Determine the total cost of manufacturing 26,000 keyboards.
a.$720,000
b.$562,000
c.$598,000
d.$468,000
c.$598,000

Total Variable Cost = Variable Rate × Units of OutputVariable Rate = Total Variable Cost ÷ Units of Output = ($346,000 - $130,000) ÷ 12,000 = $18 per keyboardTotal cost of manufacturing 26,000 keyboards = Fixed Cost + Variable Cost= $130,000 + ($18 × 26,000) = $598,000
Which of the following is an example of a discretionary fixed cost?
a.Depreciation on an office building
b.Property tax
c.Lease installment
d.Advertising cost
d.Advertising cost
The higher the percentage of cost variability explained by the coefficient of determination, _____.
a.the better job the dependent variable does of explaining the independent variable
b.the lesser is the accuracy with which the dependent variable explains the independent variable
c.the better job the independent variable does of explaining the dependent variable
d.the lesser is the accuracy with which the independent variable explains the dependent variable
c.the better job the independent variable does of explaining the dependent variable
Which of the following is an example of a variable cost for a manufacturing unit?
a.Direct materials cost
b.Advertising cost
c.Lease payment
d.Plant supervisor's salary
a.Direct materials cost
Olivine Refrigerators has 12 sales representatives, each earning a salary of $47,000 per year plus a commission of $18 per refrigerator sold. If 31,000 refrigerators are sold, then the total cost associated with the sales representatives is:
a.$1,122,000.
b.$564,000.
c.$558,000.
d.$1,410,000.
a.$1,122,000

Total cost associated with the sales representatives = (12 × $47,000) + ($18 × 31,000) = $564,000 + $558,000 = $1,122,000
Which of the following is true of a fixed cost?
a.The per-unit fixed cost is always constant irrespective of the number of units produced.
b.Fixed costs in total are constant within the relevant range as the level of output changes.
c.The per unit fixed cost increases with an increase in the level of output.
d.Fixed costs in total vary in direct proportion to changes in output within the relevant range.
b.Fixed costs in total are constant within the relevant range as the level of output changes.
Identify the type of costs that has an increased fixed component at specified intervals.
a.Step costs
b.Committed fixed costs
c.Discretionary fixed costs
d.Mixed costs
a.Step costs
In the high-low method, the high and low points are identified by looking at the:
a.associated costs.
b.activity levels.
c.revenue drivers.
d.opportunity cost levels.
b.activity levels.
Food Service Corp. offers a meal service for commuting college students. In the month of January, 1,800 meals were served at a total cost of $5,400. In February, 1,450 meals were served at a total cost of $4,700, and the total number of meals served for March were 1,200 at a total cost of $4,200. Using the high-low method, the variable cost per unit is $2.00. What is the total fixed cost and the total variable cost for January?
a.The total fixed cost is $2,900, and the variable cost is $2,500.
b.The total fixed cost is $2,500, and the variable cost is $2,900.
c.The total fixed cost is $3,600, and the variable cost is $1,800.
d.The total fixed cost is $1,800, and the variable cost is $3,600.
d.The total fixed cost is $1,800, and the variable cost is $3,600.

Total Variable Cost = Variable Rate × Units of Output = $2.00 × 1,800 = $3,600Total Fixed Cost = Total Cost - Total Variable Cost = $5,400 - $3,600 = $1,800
Which of the following is the expression for the total cost equation?
a.Total Cost = Total Fixed Cost + (Total Variable Cost ÷ Units of Output)
b.Total Cost = (Total Fixed Cost ÷ Units of Output) + Total Variable Cost
c.Total Cost = Total Fixed Cost + (Fixed Rate × Units of Output)
d.Total Cost = Total Fixed Cost + (Variable Rate × Units of Output)
d.Total Cost = Total Fixed Cost + (Variable Rate × Units of Output)
The difference between variable costing and absorption costing hinges on the treatment of: a.fixed manufacturing overhead. b.variable manufacturing overhead. c.variable selling overhead. d.fixed selling overhead.a.fixed manufacturing overhead.The following information relates to Diamond Inc. Units sold ($400 per unit): 2,000 Variable costs per unit: Direct materials: $80 Direct labor: 50 Variable overhead: 20 Fixed costs: Fixed overhead per unit produced: $30 Fixed selling and administrative expenses:200,000 Determine the cost of goods sold under absorption costing. a.$540,000 b.$500,000 c.$360,000 d.$400,000c.$360,000 Absorption-costing unit cost = $80 + $50 +$20 + $30 = $180Cost of Goods Sold = Units Sold × Absorption Unit Product Cost = 2,000 units × $180 = $360,000The following data relates to Alpha Company.Units in beginning inventory— Units produced: 26,000 Units sold ($300 per unit): 20,000 Variable costs per unit: Direct materials: $35 Direct labor: 60 Variable overhead: 30 Fixed costs: Fixed overhead per unit produced: $45 Fixed selling and administrative expenses: 150,000 Determine the value of ending inventory under variable costing. a.$570,000 b.$1,020,000 c.$750,000 d.$660,000c.$750,000 Units Ending Inventory = Units Beginning Inventory + Units Produced − Units Sold = 0 + 26,000 − 20,000 = 6,000 unitsVariable-costing unit cost = $35 + $60 + $30 = $125Value of Ending Inventory = Units Ending Inventory × Variable Unit Product Cost = 6,000 units × $125 = $750,000Which of the following costs is always expensed on the income statement under absorption costing as well as variable costing? a.The cost of direct labor b.Administrative expenses c.Fixed factory overhead d.The cost of direct materialsb.Administrative expensesWhich of the following statements is true of absorption costing? a.It treats fixed manufacturing overhead as a period cost. b.It is used only for internal reporting purposes. c.It treats fixed selling overhead as a product cost. d.It assigns all manufacturing costs to the product.d.It assigns all manufacturing costs to the product.The percentage of variability in the dependent variable explained by an independent variable is called the: a.coefficient of regression. b.coefficient of determination. c.coefficient of correlation. d.coefficient of gradation.b.coefficient of determination.Which of the following is true of a coefficient of determination? a.Its value always lies between 1 and 100. b.It is the percentage of variability in the independent variable explained by a dependent variable. c.It has a value of 1 if the independent variable completely explains the variability of the dependent variable. d.It is depicted using the symbol D2.c.It has a value of 1 if the independent variable completely explains the variability of the dependent variable.If the cost equation yields a coefficient of determination of 81%, it means that the: a.dependent variable explains 19% of the variability in cost. b.dependent variable explains 81% of the variability in cost. c.independent variable explains 81% of the variability in cost. d.independent variable explains 19% of the variability in cost.c.independent variable explains 81% of the variability in cost.The closer the coefficient of determination (R2) is to _____, the better. a.0 b.0.5 c.-1 d.1d.1In recording mixed costs such as utilities in the accounting records, usually, _____. a.only the variable component is recorded b.a clear distinction between fixed and variable costs is made c.only the fixed component is recorded d.no attempt is made to separate variable and fixed costsd.no attempt is made to separate variable and fixed costsIf the cost equation yields a coefficient of determination of 80%, it means that the: a.dependent variable explains 80% of the variability in cost. b.independent variable explains 20% of the variability in cost. c.independent variable explains 80% of the variability in cost. d.dependent variable explains 20% of the variability in cost.c.independent variable explains 80% of the variability in cost.Which of the following is true of a fixed cost? a.Fixed costs in total are constant within the relevant range as the level of output changes. b.The per-unit fixed cost is always constant irrespective of the number of units produced. c.The per unit fixed cost increases with an increase in the level of output. d.Fixed costs in total vary in direct proportion to changes in output within the relevant range.a.Fixed costs in total are constant within the relevant range as the level of output changes.The cost of purchase of plant and equipment is an example of a(n): a.discretionary fixed cost. b.unavoidable variable cost. c.committed fixed cost. d.discretionary variable cost.c.committed fixed cost.Which of the following is an example of a variable cost for a manufacturing unit? a.Direct materials cost b.Plant supervisor's salary c.Advertising cost d.Lease paymenta.Direct materials costStep costs are also called: a.semi-fixed costs. b.scattered costs. c.committed fixed costs. d.discretionary fixed costs.a.semi-fixed costs.For planning and control purposes, _____. a.mixed costs should be separated into variable and fixed components b.mixed costs should be ignored c.mixed costs should be considered sunk costs d.only the fixed component of mixed costs should be considered Feedback Areaa.mixed costs should be separatedGamma Company manufactures power transmission grids. It has 3 sales representatives, each earning a salary of $38,000 plus a commission of $180 per grid sold. The total cost associated with the sales representatives is an example of a: a.step cost. b.mixed cost. c.variable cost. d.fixed cost.b.mixed cost.In the mixed cost equation: Total Cost = Fixed Cost + (Variable Rate × Units of Output), the dependent variable is _____. a.total cost b.fixed cost c.units of output d.variable ratea.total costIn the high-low method, the high and low points are identified by looking at the: a.activity levels. b.associated costs. c.revenue drivers. d.opportunity cost levels. Feedback Areaa.activity levels.Turquoise Company manufactures travel bags. The high output occurred in May, with 1,200 units produced at a total cost of $8,000. The low output was in January, with 600 units produced at a total cost of $3,000. Determine the variable rate by using the high and low points. a.$6.67 b.$5.00 c.$4.17 d.$8.33d.$8.33Which of the following is true about the scattergraph method of separating a mixed cost into its fixed and variable components? a.The occurrence of outliners is the biggest disadvantage of this method. b.It generates the smallest possible cost prediction errors. c.The quality of the cost formula depends on the quality of the subjective judgment of the analyst. d.It is a statistical way to find the best-fitting line through a set of data points.c.The quality of the cost formula depends on the quality of the subjective judgment of the analyst.The purpose of creating a cost formula is to provide: a.a qualitative estimate of only the variable cost per unit of the cost drivers. b.a quantitative estimate of only the total fixed costs of the cost drivers. c.a qualitative estimate of both total fixed costs and the variable cost per unit of the cost drivers. d.a quantitative estimate of both total fixed costs and the variable cost per unit of the cost drivers.d.a quantitative estimate of both total fixed costs and the variable cost per unit of the cost drivers.Identify the true statement about variable costing. a.It is the most acceptable product-costing method for external reporting. b.It treats fixed selling overhead as a product cost. c.It treats fixed manufacturing overhead as a period cost. d.It assigns all manufacturing costs to the product.c.It treats fixed manufacturing overhead as a period cost.Area Which of the following costs is always expensed on the income statement under absorption costing as well as variable costing? a.The cost of direct materials b.The cost of direct labor c.Administrative expenses d.Fixed factory overheadc.Administrative expensesThe difference between variable costing and absorption costing hinges on the treatment of: a.fixed selling overhead. b.variable manufacturing overhead. c.variable selling overhead. d.fixed manufacturing overhead.d.fixed manufacturing overhead.The percentage of variability in the dependent variable explained by an independent variable is called the: a.coefficient of determination. b.coefficient of regression. c.coefficient of correlation. d.coefficient of gradation.a.coefficient of determination.