ACC 113 Chapter Notes - Chapter 3: Fixed Cost, Variable Cost, Regression Analysis

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amaranthjellyfish619

5 Jan 2021

School

Tunxis Community College

Department

Accounting

Course

ACC 113

Professor

Lardie

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Document Summary

Cost behaviour how costs react to changes in production volume or other levels of activity. Fixed costs costs that remain same in total when production volume increase or decrease but vary per unit. E. g. rent, depreciation of building, salary of plant manager, insurance and property taxes. Common example is rent: if rent costs 000 per year, rent cost per unit of product will be for 5000 products and if 2500 products produced. Variable costs costs that stay same per unit but change in total as production volume increase or decreases. E. g. direct material, direct labour (if paid per unit of output), factory supplies, energy costs. Consider materials used: if production of classroom desk costs , total direct materials will increase or decrease proportionately with production volume. Trend is to automate and replace direct factory labour with robotics. This leads to increasing fixed costs (depreciation) and decreasing variable costs (direct labour)

Related Questions

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:

a. increase.

b. remain the same.

c. decrease.

d. increase or decrease, depending upon the percentage increase in wage rates.

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:

a. 53% and $7 per unit.

b. 47% and $11 per unit.

c. 52% and $11 per unit.

d. 47% and $8 per unit.

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

a. 0

b. 1.3

c. 3.1

d. 1.25

Which of the following describes the behavior of the fixed cost per unit?

a. Increases with increasing production

b. Remains constant with changes in production

c. Decreases with increasing production

d. Decreases with decreasing production

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

a. increase.

b. increase or decrease, depending upon the percentage increase in utility rates.

c. decrease.

d. remain the same.

Costs that vary in total in direct proportion to changes in an activity level are called:

a. differential costs.

b. fixed costs.

c. variable costs.

d. sunk costs

Which of the following conditions would cause the break-even point to increase?

a. Total fixed costs decrease

b. Unit variable cost decreases

c. Unit variable cost increases

d. Unit selling price increases

In cost-volume-profit analysis, all costs are classified into the following two categories:

a. discretionary costs and sunk costs

b. variable costs and fixed costs

c. mixed costs and variable costs

d. sunk costs and fixed costs

ochrespider8

Miller Company produces speakers for home stereo units. The speakers are sold to retail stores for Â£30. Variable costs per unit are: Direct materials Â£9.00; Direct labour 4.50; Distribution 1.50 and Variable Factory overhead 3.00. Fixed costs per month are: Factory overhead Â£120,000 and Selling and admin. 60,000. The variable distribution costs are for transportation to the retail stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year. An Atlanta wholesaler has proposed to place a special one-time order for 7,000 units at a special price of Â£25.20 per unit. The wholesaler would pay all distribution costs, but there would be additional fixed selling and administrative costs of Â£6,000. In addition, assume that overtime production is not possible and that allother information remains the same as the original data. The effect on profits if the special order is accepted is

Select one:

a. cannot be determined

b. Â£30,900 decrease

c. Â£50,100 increase

d. Â£30,900 increase

e. Â£50,100 decrease

greybear367

Gower Ltd., a manufacturer of plastic products, reports thefollowing manufacturing costs and account analysis classificationfor the year ended December 31, 2014.

Account Classification Amount

Direct materials	All variable	300,000
Direct manufacturing labour	All variable	225,000
Power	All variable	37,500
Supervision labour	20%	variable	56,250
Materials-handling labour	50%	variable	60,000
Maintenance labour	40%	variable	75,000
Depreciation	0%	variable	95,000
Rent, property taxes, and administration	0%	variable	100,000

Gower Ltd, produced 75,000 units of product in 2014. Gowerâsmanagement is estimating costs for 2015 on the basis of 2014numbers. The following additional information is available for2015:

a. Direct materials prices in 2015 are expected to increase by5% compared with 2014.

b. Under the terms of the contract, direct manufacturing labourwage rates are expected to increase by 10% in 2015 compared with2014.

c. Power rates and wage rates for supervision, materialshandling, and maintenance are not expected to change from 2014 to2015.

d. Depreciation costs are expected to increase by 5%, and rent,property taxes, and administration costs are expected to increaseby 7%.

e. Gower, Inc., expects to manufacture and sell 80,000 units in2015. Required:

1. Prepare a schedule of variable, fixed, and totalmanufacturing costs for each account category in 2015. Estimatetotal manufacturing costs for 2015.

2. Calculate Gowerâs total manufacturing cost per unit in 2014,and estimate total manufacturing cost per unit in 2015.

3. How can you get better estimates of fixed and variable costs?Why would these better estimates be useful to Gower?

plumdonkey487

ACC 113 Chapter Notes - Chapter 3: Fixed Cost, Variable Cost, Regression Analysis

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