StudiesTime-24/7 Acadmic Help: 2017

Wednesday, 19 July 2017

Weaknesses of the high-low method include all of the following EXCEPT

Weaknesses of the high-low method include all of the following EXCEPT
    a. the method is relatively complex and difficult to apply.
   b. the method does not detect if the cost behavior is nonlinear.
   c. the high and low activity levels may not be representative.
   d. only two observations are used to develop the cost function.

Answer
a. the method is relatively complex and difficult to apply.

Assume the following information:

Volume    Total Cost
90 units    $1,200
98 units    $1,300
106 units    $1,400

What is the variable cost per unit?
     a. $13.75
    b. $12.50
    c. $15.00
    d. $14.78

Answer
b. $12.50

The following is an example of a mixed cost:
     a. direct materials
    b. materials used in production
    c. salary plus commission on sales
    d. supervisors' salaries
Answer
. salary plus commission on

Direct materials are an example of a
     a. mixed cost.
    b. step cost.
    c. variable cost.
    d. fixed cost.

Answer
c. variable cost.

The direct material cost is $20,000 when 2,000 units are produced. What is the direct material cost for 2,500 units produced?
     a. $ 5,000
    b. $20,000
    c. $25,000
    d. $15,000

Answer
$20,000/2,000 × 2,500 = $25,000

As the volume of activity increases within the relevant range, the variable cost per unit
     a. increases.
    b. decreases at first, then increases.
    c. remains the same.
    d. decreases.

Answer
c. remains the same.

The range of activity within which a linear cost function is valid is called the
     a. None of these choices are correct.
    b. activity range.
    c. relevant range.
    d. normal range.

Answer
c. relevant range.

Fixed cost per unit is $7 when 25,000 units are produced and $5 when 35,000 units are produced. What is the total fixed cost when nothing is produced?
     a. $12
    b. $130,000
    c. $200,000
    d. $175,000

Answer
$7 × 25,000 = $175,000