Temple University

ACCT 2102

Ch 4

1)In the short run:

1. 1. Most fixed costs are controllable
   2. Most fixed costs are not controllable
   3. Most variable costs are not controllable
   4. Both fixed costs and variable costs are controllable
   5. Neither fixed costs nor variable costs are controllable

2. If fixed costs are $15,000, profit before income taxes is $55,000, revenues are $160,000, and variable costs are $90,000, then the contribution margin is:

A. $105,000.

B. $90,000.

C. $70,000.

D. $55,000.

3. Spudz Toys estimated production of 2,000 toys with a selling price of $4.00. If the variable cost per toy is $1.00 and fixed costs are $2,500, what is estimated profit?

A.   $3,500

B.   $8,000

C.   $6,000

D.   $5,500

4. Regression analysis:
   1. Extracts the minimum amount of information from the data.
   2. Extracts the maximum amount of information from the data.
   3. Only gives correct estimates if there are outliers in the data.
   4. Is less accurate than the high-low method.

5. Estimate variable costs per unit using the following information

Month                  Units Sold                        Total Costs

January                                980                                $3,500

February                              780                                $4,000

March                                 1,080                              $5,500

April                                     1,280                              $5,000

1. 1. $2
   2. $5

C. $20

D. $1,500

6. Relevant range is defined as:
   1. The proportion of total costs that are fixed and variable.
   2. A statistical method that uses the normal range of operations to estimate fixed and variable costs.
   3. A non-statistical method that uses the normal range of operations to estimate fixed and variable costs.
   4. A firm’s normal range of operations, in which we expect a stable relation between activity and costs.
   5. None of the above.

7. Estimate unit variable costs and total fixed costs using the following data.

The data represents total costs incurred in July. The firm produced 10 units in July.

1. unit variable cost = $10/unit, fixed cost=$270
2. unit variable cost = $12/unit, fixed cost=$250
3. unit variable cost = $15/unit, fixed cost=$220
4. unit variable cost = $120/unit, fixed cost=$250

8. Use the cost structure estimates from question 7 to predict costs at production volume of 1,000 units.