Fixed costs do not respond to: Capital expenditures made by the company Short-te

Question

Fixed costs do not respond to: Capital expenditures made by the company Short-term changes in the amount of activity Changes in committed expenditures Discretionary investments in the company Cari German uses gas to heat her home. She has accumulated the following information regarding her monthly gas bill and monthly heating degree-days. The heating degree-days value for a month is found by first subtracting the average temperature for each day from 65 degrees and then summing these daily amounts together for the month. Month Heating Degree-Days Gas Bill February 1,900 $254 April 600 $101 What will be the increase in Cari's monthly gas bill per heating degree-day using the high-low method?

$0.3309 $0.1177 $46.00 $153.00

Cari German uses gas to heat her home. She has accumulated the following information regarding her monthly gas bill and monthly heating degree-days. The heating degree-days value for a month is found by first subtracting the average temperature for each day from 65 degrees and then summing these daily amounts together for the month. Month Heating Degree-Days Gas Bill February 1,900 $254 April 600 $101 The equation representing the relationship between the gas bill (Y) and heating degree-days (X) is Y = $0.1177X Y = $24.52 + $0.1177X Y = $30.37 + $0.1177X Y = $120 + $0.1177X

The Fairmont Machine Shop wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data: Month Cost of Electricity (Y) Direct Labor-Hours (X) January $14,000 1,500 April $15,000 1,700 July $17,000 2,000 October $14,500 1,600 What would be the best equation using the high-low method? Y = $4,000 + $7X Y = $0 + $9X Y = $1,000 + $8X Y = $5,000 + $6X Really Fast Delivery Services has the collected the following information about operating expenditures for its delivery truck fleet for the past five years: Year Miles Operating Costs 2009 110,000 $390,000 2010 140,000 $420,000 2011 100,000 $360,000 2012 130,000 $410,000 2013 170,000 $450,000 What is the best estimate of total operating expenses for 2014 using the high-low method based on total expected miles of 120,000?

$385,500 $390,000 $392,000 $402,000

Eva Company sells one product at a price of $25 per unit. Variable expenses are 40 percent of sales, and fixed expenses are $25,000. The sales dollars level required to break even are:

$ 2,500 $ 10,000 $ 33,333 $ 41,667

The following costs relate to Soapbox Company for a relevant range of up to 10,000 units annually: Variable Costs: Direct materials $2.50 Direct labor 0.75 Manufacturing Overhead 1.25 Selling and administrative 1.00 Fixed Costs: Manufacturing overhead $20,000 Selling and Administrative 10,000 Soapbox sells each unit for $10.00. Which of the following equations best describes the equation to determine total profit for a sales volume of 8,000 units?

Profit = $10.00X – ($30,000 + $5.50X) Profit = $30,000 + $5.50X Profit = $10.00X – ($10,000 – $4.50X) Profit = $10X

The following costs related to Summertime Company for a relevant range of up to 20,000 units annually: Variable Costs: Direct materials $5.00 Direct labor 1.50 Manufacturing Overhead 2.50 Selling and administrative 3.00 Fixed Costs: Manufacturing overhead $20,000 Selling and Administrative 10,000 The selling price per unit of product is $15.00. At a sales volume of 15,000 units, what is the total profit for Summertime Company

$ 30,000 $ 15,000 $ 225,000 $ 300,000

Peoria Corporation reported the following on their contribution format income statement: Sales (12,000 units) $350,000 Less: variable expenses 200,000 Contribution margin $150,000 Less: fixed expenses 125,000 Net operating income $ 25,000 If sales increase by 10%, net operating income will increase by what amount?

$-0 $ 1,500 $ 15,000 $ 30,000

The Cornell Milling Company manufactures an intermediate product identified as W1. Variable manufacturing costs per unit of W1 are as follows: Direct materials $ 5 Direct labor $15 Variable manufacturing overhead $10 Ithaca Tools has offered to sell Cornell Milling 10,000 units of W1 for $40 per unit. If Cornell Milling accepts the offer, $50,000 of fixed manufacturing overhead will be eliminated. Applying differential analysis to the situation, Cornell Milling should:

Buy W1; the savings is $100,000 Buy W1; the savings is $50,000 Buy W1; the savings is $50,000 Make W1; the savings is $50,000

Explanation / Answer

High Low Difference between High and Low No of heating days 1900 600 1300 Electricity bill value $254 $101 $153 Variable cost per heating day $8.50 Hence, per heating day the cost would increase by $ 8.50 Fairmount High Low Difference between High and Low Electricity cost 17000 14000 3000 Labour hours 2000 1500 500 Variable cost per hour $6.00 Variable cost $12,000 Fixed cost $5,000 17000-12000 Hence, the best equation would be Y = $5,000 + $6X Reality Fast delivery High Low Difference between High and Low Operating cost 450000 360000 90000 Year miles 170000 100000 70000 Variable cost per year miles $1.29 Variable cost $2,18,571 fixed cost $2,31,429 total cost $4,50,000 If year miles 120000 Variable cost $1,54,286 Fixed cost $2,31,429 Total cost $3,85,714 Hence, 385500 is the right answer Eva company Breakeven sales = Fixed cost / Contribution % Sales $25 Variable cost % 40% Contribution % 60% Fixed cost $25,000 Breakeven Sales is $41,667 Soab box company Variable costs Materials $2.50 Labour $0.75 Manufacturing Overhead $1.25 Selling Overhead $1.00 Total Variable cost per unit $5.50 Fixed cost Manufacturing Overhead $20,000 Selling Overhead $10,000 Total $30,000 Selling price/unit $10 Volume 10000 units Profit = 10000 units * $10 - ($30000 - 10000 units * $5.5) Hence, Profit = $10.00X – ($30,000 + $5.50X) Summer time Variable costs Materials $5.00 Labour $1.50 Manufacturing Overhead $2.50 Selling Overhead $3.00 Total Variable cost per unit $12.00 Fixed cost Manufacturing Overhead $20,000 Selling Overhead $10,000 Total $30,000 Selling price/unit $15 Volume 15000 units Contribution /unit $3.00 Contribution value $45,000.00 Fixed costs -$30,000 Profit $15,000.00 Peoria corporation Contribution value $1,50,000 Volume 12000 Contribution per unit $12.50 Fixed cost 125000 if sales volume increase by 10% 1200 units Net operating income would increase by contribution value Increase in operating income is $15,000.00 = 1200 * $12.5 Cornell Milling Variable cost of production/unit 30 cost of purchase /unit 40 Excess cost perunit 10 units 10000 Total excess variable cost of buying 100000 Fixed cost savings if bought 50000 Hence, best option is to to make and save $50000

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