Cost Behavior and Analysis in Accounting
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Cost Behavior and Analysis in Accounting

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Questions and Answers

What is the variable cost per guest calculated using the High-Low Method?

  • $6 per guest
  • $12 per guest
  • $8 per guest (correct)
  • $10 per guest

    • What formula is used to find the slope in the High-Low Method?

  • Variable cost / Fixed cost
  • Total cost / Total volume
  • Fixed cost / Total cost
  • Rise / Run (correct)

    • From the High-Low Method, what is the fixed cost component when the total mixed cost is $209,600?

  • $10,000
  • $5,000
  • $8,000 (correct)
  • $12,000

    • In the equation $y = 8x + 8,000$, what does 'y' represent?

    <p>Total monthly utilities cost</p> Signup and view all the answers

    Which tool in Excel is used for regression analysis?

    <p>Analysis Toolpack</p> Signup and view all the answers

    What should be highlighted in the input ‘Y’ Range during regression analysis?

    <p>Total costs range</p> Signup and view all the answers

    What is the first step to conduct regression analysis in Excel after adding the Analysis Toolpack?

    <p>Click on Data Analysis</p> Signup and view all the answers

    What does 'x' represent in the equation $y = 8x + 8,000$?

    <p>Number of guests</p> Signup and view all the answers

    What is the contribution margin for AAA Fitness Equipment for the month ended July 31?

    <p>$21,600</p> Signup and view all the answers

    In variable costing, which costs are assigned only to products?

    <p>Variable manufacturing costs including direct materials and direct labor</p> Signup and view all the answers

    Under absorption costing, which of the following is true?

    <p>Products absorb all manufacturing costs, including fixed MOH.</p> Signup and view all the answers

    What is the formula for calculating the contribution margin?

    <p>Sales – Variable Costs</p> Signup and view all the answers

    Which of the following statements about fixed manufacturing overhead is correct?

    <p>It is included in product costs under variable costing.</p> Signup and view all the answers

    What is a characteristic of variable costs?

    <p>They increase with the volume of production.</p> Signup and view all the answers

    Which of the following best describes fixed costs?

    <p>They remain constant within a relevant range of production.</p> Signup and view all the answers

    What does the relevant range refer to in cost behavior?

    <p>The production levels where fixed costs and variable costs behave predictably.</p> Signup and view all the answers

    When would a company likely incur higher fixed costs?

    <p>When it decides to lease additional facilities to accommodate more customers.</p> Signup and view all the answers

    What impact does a volume discount have on variable costs?

    <p>It decreases the variable cost per unit as production volume increases.</p> Signup and view all the answers

    In what scenario might fixed costs become variable?

    <p>When the company expands its operations beyond its current capacity.</p> Signup and view all the answers

    What analysis method can be used to predict costs based on historical data?

    <p>Regression analysis.</p> Signup and view all the answers

    Which type of income statement presentation uses the contribution margin?

    <p>A variable costing statement.</p> Signup and view all the answers

    Which method is utilized to identify if a relationship exists between the cost driver and total cost?

    <p>Scatter plot</p> Signup and view all the answers

    How is the high point selected in the high-low method?

    <p>The point with the highest total cost is chosen.</p> Signup and view all the answers

    What is a key advantage of utilizing regression analysis to derive the cost equation?

    <p>All data points are utilized to compute the cost equation.</p> Signup and view all the answers

    What benefit does the contribution margin income statement provide to managers?

    <p>It assists in strategic decision-making and planning.</p> Signup and view all the answers

    Which statement accurately reflects a characteristic of account analysis?

    <p>It requires a detailed examination of historical costs.</p> Signup and view all the answers

    What is the primary characteristic of fixed costs within the relevant range?

    <p>They remain constant regardless of production levels.</p> Signup and view all the answers

    What effect does an increase in hotel capacity have on variable costs per unit?

    <p>Variable costs per unit may decrease due to volume discounts.</p> Signup and view all the answers

    How are curvilinear costs best approximated?

    <p>As a mixed cost.</p> Signup and view all the answers

    Why is the average cost per member not an effective metric for predicting total costs at different levels?

    <p>Fixed costs per member decrease as membership increases.</p> Signup and view all the answers

    What is the total fixed cost per month for Fitness-for-Life?

    <p>$10,000</p> Signup and view all the answers

    What happens to the average cost per member as the number of members increases from 100 to 750?

    <p>It decreases on average.</p> Signup and view all the answers

    When calculating total operating costs, which costs must be combined?

    <p>Fixed costs and variable costs.</p> Signup and view all the answers

    What is the fixed cost per member when the club operates at 500 members?

    <p>$20.00</p> Signup and view all the answers

    Study Notes

    Cost Behaviours

    • Variable Costs: Increase with volume
    • Fixed Costs: Remain constant, regardless of changes in volume
    • Relevant Range: The range of operations within which the total fixed costs and the variable cost per unit remain constant

    High-Low Method

    • Formula:
      • Variable cost per unit = (Change in cost)/(Change in volume)
      • Slope = Change in cost / change in volume
    • Steps to determine fixed costs:
      • Total mixed cost - Total variable cost = Fixed cost
      • Total Mixed Costs = Variable cost component + Fixed cost component

    Regression Analysis

    • Using Data Analytics Tools in Excel:
      • Add-ins > Analysis Toolpack > Go
      • Data tab > Data Analysis > Regression

    Contribution Margin Income Statement

    • Organized by Behaviour:
      • Variable Costs
      • Fixed Costs
    • Contribution Margin: Sales - Variable Costs

    Variable Costing vs. Absorption Costing

    • Variable Costing: Assigns only variable manufacturing costs to products (DM, DL, Variable MOH), fixed manufacturing overhead = period cost, used for internal management decisions, required by financial reporting standards for external reporting
    • Absorption Costing: Assigns all manufacturing costs, both variable and fixed, to products, product costs include ALL inventoriable costs, traditional income statement

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    Related Documents

    Managerial Accounting Chapter 3 PDF

    Description

    Explore the concepts of cost behaviors, including variable and fixed costs, through various methods such as the High-Low method and regression analysis. This quiz will also cover the contribution margin income statement and differences between variable costing and absorption costing. Ideal for accounting students and professionals looking to deepen their understanding.

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