Question 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 18,600 27,600
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?
Question 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 of rooms cleaned 250 160 200 150 270 170 260
Cleaning cost $6,450 $4,060 $5,100 $4,100 $6,880 $4,200 $6,530
How much are estimated monthly variable costs using the high-low method?
Question 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
- mixed cost
- step cost
- variable cost
- fixed cost
Question 4: Winny's Office Furniture has a contribution margin ratio of 16%. If fixed costs are $189,800, how many dollars of revenue must the company generate in order to reach the break-even point?
Question 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 $90,600 per year
Selling & administrative 22,800 per year
How many units must be sold to break-even?
Question 6: The use of fixed cost to increase profits at a rate faster than sales increase is called:
- "What if " analysis
- C-V-P analysis
- operating leverage
- contribution margin approach
Question 7: Assume Sparkle Co. expects to sell 150 units next month. The unit sales price is $100, unit variable cost is $45, and the fixed costs per month are $5,000. The margin of safety is:
Question 8: Which of the following statements about the relevant range is true?
- Cost functions outside the relevant range are usually linear
- The relevant range is the normal length of time in a company's accounting period
- Estimates outside the relevant range are useful
- Cost functions within the relevant range are assumed to be linear