In describing the cost formula equation, Y = a + bX, which of the following is correct:

A)“Y” is the independent variable.

B)“a” is the variable cost per unit.
C)“a” and “b” are valid for all levels of activity.
D)in the high-low method, “b” equals the change in cost divided by the change in activity.
Answer: D

The high-low method is used with which of the following types of costs?
A)Variable.
B)Mixed.
C)Fixed.
D)Step-variable.
Answer: B

Shipping costs at Columbia Mining Company are a mixture of variable and fixed components
The Company shipped 8,000 tons of coal for $400,000 in shipping costs in February and 10,000
tons for $499,000 in March assuming that this activity is within the relevant range, expected
shipping costs for 11,000 tons would be:
A)$544,500 B)$548,500 C)$422,222 D)$554,000
Answer: B

Eddy Corporation has provided the following production and total cost data for two levels of
monthly production volume. The company produces a single product.
Production volume6,000 units7,000 units
Direct materials$582,600$679,700
Direct labor$136,200$158,900
Manufacturing overhead$691,800$714,700
The best estimate of the total variable manufacturing cost per unit is: (Note: Including material,
labor and overhead)
A)$22.90 B)$119.80 C)$142.70 D)$97.10
Answer: C

Given the cost formula Y = $12,500 + $5.00X, total cost for an activity level of 4,000 units
would be:
A)$20,000 B)$12,500 C)$16,000 D)$32,500
Answer: D

The following data pertains to activity and maintenance costs for two recent years:
Year 2 Year 1
Activity level in units 11,125 6,000
Maintenance cost $6,250 $4,200
If the high-low method is used to separate fixed and variable components of the cost, which of
the following statements is correct? A)The variable cost is $0.70 per unit of activity
B)The fixed cost is $2,050
C)The variable cost is $2.50 per unit of activity
D)The fixed cost is $1,800
Answer: D

The following data relate to two levels of activity at an out-patient clinic in a hospital
Number of patient-visits4,500 5,750
General overhead$269,750 $289,125
The best estimate of the variable general overhead cost per patient-visit is closest to:
A)$15.50 B)$44.44 C)$59.94 D)$50.28
Answer: A

Golden Dragon Restaurant would like to estimate the variable and fixed components of its utilities
costs and has compiled the following data for the last five months of operations.Month
Meals served Utilities costs
December 550 $401.00
January 300 $360.00
February 250 $347.50
March 400 $385.50
April 600 $414.00
Using the high-low method of analysis, the estimated variable utilities cost per meal served is:
A)$0.22 B)$0.73 C)$0.69 D)$0.19
Answer: D

Using the high-low method of analysis, the estimated monthly fixed component of utility cost is:
A)$ 66.50 B)$300.00 C)$303.00 D)$331.00 Answer: B

East Company manufactures and sells a single product with a positive contribution margin. If the
selling price and the variable expense per unit both increase 5% and fixed expenses do not
change, what is the effect on the contribution margin per unit and the contribution margin ratio?