Question

At an activity level of 20,000 units produced, fixed costs total $30,000 and variable costs total $67,000. Assuming that this activity is within the relevant range, if 25,000 units are produced, then:

Select one:

a. total fixed costs are expected to be $37,500.

b. variable cost per unit is expected to equal $2.68.

c. fixed cost per unit is expected to equal $1.20.

d. total cost per unit is expected to equal $3.88.

Paine Company wishes to determine the fixed portion of its electrical costs (a mixed cost). Management believes that the variable portion of the electrical costs is driven by machine-hours. Information for the previous three months follows:

	Machine-hours	Electrical cost
January	33,000	$600
February	31,000	$585
March	34,000	$610

Using the high-low method, the fixed portion of the company's electrical costs would be estimated to be closest to:

Select one:

a. $283.

b. $327.

c. $375.

d. $408.

An income statement for Sam's Bookstore for the first quarter of the year is presented below:

Sam's Bookstore Income Statement For Quarter Ended March 31
Sales		$900,000
Cost of goods sold		630,000
Gross margin		270,000
Less operating expenses:
Selling	$100,000
Administration	104,000	204,000
Net operating income		$ 66,000

On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed.
The net operating income using the contribution approach for the first quarter is:

Select one:

a. $270,000.

b. $180,000.

c. $144,000.

d. $66,000.

Answer 1

Total Fixed cost does not change with Change in activity within relevant lange so to tal fixed cost will be $30000 at 2500 units so option a is not correct. Variable cost per unit does not change with Change in activity so valiable Cost per unit is 67000 ( 20000 = $3.35/unit At 25000 unity also variable cost per unit will be $3.35 so option b is not correcto Fixed cost option per unit = 30000 / 25000 = $1020 is correct answer 4.55 Total cost per unit - 3.35 + 120= option d is not correct.

a a variable cost per unit high activity cost - low high activity Unit - low activity cost activity Unit - 6610 - 585 34000 – 31000 3000 0.00233 Total variable cost = 34000 X 0.00233 - 283 Fixed costa Total Cost - Variable cost G10 - 233 L option b is correct. 90oooo - Sales less Variable cost cost of good sold selling (180000 85 Administration (900000 X 4%) Total variable cost le Contribution margin Fixed cost - Selling (100,000-90000) Adminstration (1040oo- 36000) Total Fired cost Net operating Income 630000 98000 36000 756000 144000 10000 68000 78000 166000 optiond i.e. 66000 is correct answer..