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Exam 2: Cost Behavior and Cost Estimation Summary of Questions by Objectives and Blooms Taxonomy

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Question 91

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A fixed cost is a cost that does not change in total with the activity level.

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Question 92

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A contribution format income statement just rearranges the individual costs components and produces the same operating income as the traditional functional income statement.

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Question 93

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Step costs are fixed over only a small range of activity.Once that level of activity has been exceeded,total cost

Suppose your cell phone company offers a plan under which you buy time per minute.A one-minute call costs you $0.10.If you talk 100 minutes it costs you $10.This is an example of a

You and two friends decide to rent an apartment off campus.You have found an apartment for $750 per month.You and your two friends will share the rent equally.This is an example of a

A contribution format income statement classifies costs by

Jenny's Cutting Station is a new concept in haircuts; low cost and very quick.Set in a local mall,Jenny's offers 15 minute haircuts for harried shoppers who do not have time for lengthy appointments.To ensure that the clients are in and out quickly,she schedules her 5 employees based on expected client traffic.Each of the employees is paid $1,200 per month,with part of their pay coming from client tips.Jenny pays rent and overhead costs of $2,000 per month.Because of the quick nature of the service,Jenny doesn't have time to clean combs in between clients,so she uses a new comb for each customer,at a cost of $.55 each.She also provides shampoo and conditioner for each client at a cost of $.95 per client.The average price for a haircut is $12.Jenny pays herself $5,000 per month.What is Jenny's contribution margin ratio?

Assume a scattergraph shows $100 at no activity and $1,500 at an activity level of 1,000 units. The variable cost per unit is:

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which of the following statement is not true?

Vest Construction Company's cost of renting a crane for the last four months is as follows: Using the high-low method,what is the company's estimated variable and fixed component of operating expenses?

A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior.Which of the following is not classified as a cost function?

Determine the fixed cost given the following information: Lowest level of activity – 200 units at a total cost of $600 Highest level of activity – 800 units at a total cost of $1,800

A characteristic of a variable cost is