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#### A cost whose total amount changes in direct proportion to a change in volume is a(n) __________ cost

###### Management

1. A cost whose total amount changes in direct proportion to a change in volume is a(n) __________ cost.
fixed
irrelevant
variable
mixed
2. Total fixed costs for Herman Enterprises are \$200,000. Total costs, both fixed and variable, are \$550,000 if 100,000 units are produced. The variable cost per unit is:
\$2.00
\$7.50
\$5.50
\$3.50
3. If production increases by 15%, how will total variable costs likely react?
Increase by 7.5%
Increase by 15%
Stay the same
Decrease by 15%
4. Plymouth Manufacturing produces cup holders. Total manufacturing costs are \$400,000 when 40,000 holders are produced. Of this amount, total variable costs are \$120,000. What are the total production costs when 60,000 holders are produced? (Assume the same relevant range for both production levels.)
\$460,000
\$180,000
\$580,000
\$600,000
5. Feathered Nests produces decorative birdhouses. The company's average cost per unit is \$20.00 when it produces 2,000 birdhouses. If \$4,800 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 2,200 birdhouses will be:
\$44,000
\$4,000
\$41,780
\$43,520
6. Crystal Clear Water Hauling wants to determine a fuel surcharge to add to its customers' bills based on the number of miles driven to each area. It wants to separate the fixed and variable portion of the truck's operating costs so it has a better idea of how distance affects these costs. Crystal Clear Water Hauling has the following data available.

Month
Miles driven
Total operating costs
January
15,900
\$27,500
February
17,300
\$29,910
March
18,500
\$29,830
April
16,100
\$28,600
May
17,100
\$28,800
June
15,500
\$26,830

Using the high-low method, the monthly operating costs if Crystal Clear Water Hauling drives 18,000 miles in a month will be:
\$36,500
\$29,330
\$18,000
\$11,330
7. Fresno Home Oil Services wants to determine a fuel surcharge to add to its customers' bills based on the number of miles driven to each area. It wants to separate the fixed and variable portion of the truck's operating costs so it has a better idea of how distance affects these costs. Fresno Home Oil Services has the following data available.

Month
Miles driven
Total operating costs
January
15,900
\$9,000
February
17,300
\$9,860
March
14,500
\$8,600
April
16,100
\$8,800
May
17,100
\$8,600
June
15,500
\$8,100

Assume Fresno Home Oil Services uses the high-low method to determine its operating cost equation and earns \$0.50 per mile for 18,000 miles. What would its contribution margin be for a month if Fresno Home Oil Services prepared a contribution margin income statement for the month?
\$9,000
\$900
\$8,100
\$17,100
8. Utility costs at Service, Inc. are a mixture of fixed and variable components. Records indicate that utility costs are an average of \$0.33 per hour at an activity level of 6,620 machine hours and \$0.25 per hour at an activity level of 14,770 machine hours. Assuming that this activity is within the relevant range, what is the expected total utility cost if the company works 9,500 machine hours?
\$2,810
\$2,717
\$2,950
\$2,784
9. When calculating the breakeven point in terms of sales revenue, fixed costs should be divided by the contribution margin ratio.
10. All else being equal, a company earns more income by selling high-contribution margin products than by selling an equal number of low-contribution margin products.

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