Question

Figure 3-3. Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected. Machine Lease cost hours

Month                   Lease cost               Machine hours

April                      $21,000                    550

May                       $16,500                   420

June                      $19,000                   510

July                        $22,230                  570

1 Refer to Figure 3-3. Using the high-low method calculate the variable rate for the lease cost

a. $38.18

b. $38.20

c. $61.50

d. $37.25 2.

Refer to Figure 3-3. Using the high-low method calculate the fixed cost of leasing

a. $482

b. $516

c. $420

d. $456

3. Refer to Figure 3-3. What would Okafor Company's cost formula be to estimate the cost of leasing within the relevant range? a. total lease cost = $456 + ($38.20 × machine hours)

b. total lease cost = $516 + ($38.18 × machine hours)

c. total lease cost = $420 + ($37.25 × machine hours)

d. none of these are correct

4. Refer to Figure 3-3. What would the estimate of Okafor Company's total lease cost be at a level of 500 machine hours?

a. $19,606

b. $19,556

c. $16,464

d. $18,546

Figure 3-4. Botana Company constructed the following formula for monthly utility cost.

Total utility cost = $1,200 + ($8.10 × labor hours)

Assume that 775 labor hours are budgeted for the month of April.

5. Refer to Figure 3-4. Calculate the total variable utility cost for the month of April.

a. $1,200.00

b. $7,477.50

c. $6,277.50

d. $5,077.50 6.

Refer to Figure 3-4. Calculate the total utility cost for the month of April.

a. $7,477.50

b. $6,277.50

c. $1,200.00

d. $5,077.50 7.

Refer to Figure 3-4. If Botana Company incurs 9,600 labor hours for the year, what would be the estimate of total utility cost?

a. $76,560

b. $78,960

c. $92,160

d. none of these are correct

Figure 3-5. Maxwell Company makes treadmills. The company controller wants to calculate the fixed and variable costs associated with the janitorial costs incurred in the factory. Data for the past four months were collected.

Month                  Janitoral Cost                     Machine hours

September           $11,000                            575

October                  11,400                              610

November              10,200                              510

December              10,725                              550

8. Refer to Figure 3-5. Using the high-low method calculate the fixed cost of the janitorial services

a. $4,080

b. $7,320

c. $6,120

d. none of these are correct

9. Refer to Figure 3-5. What would Maxwell Company's estimate of total janitorial cost be at a level of 600 machine hours?

a. $11,280

b. $7,500

c. $4,080

d. $6,120

Figure 3-7. Margola Company produces hand-held calculators. The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory. Data for the past four months were collected.

Month                     Mainetnance Cost                     Machine hours

June                       $4,180                                       328

July                         3,956                                         310

August                    4,686                                         386

September              4,240                                         352 ​

Coefficients shown by a regression program are: Intercept 1,150 X Variable 1 9.06 10.

Refer to Figure 3-7. Using the results of regression, calculate the fixed cost of maintenance.

a. $1,150.00

b. $978.37

c. $9.06

d. None of these are correct.

Answer 1

1) Variable cost per unit :			(22230-16500)/(570-420)
(b)	38.2
2) Fixed cost of leasing :
Total cost			16500
Less : variable cost (5730*38.2)			-16044				14400
Fixed cost			456				4080
(d) is correct
3) What would Okafor Company's cost formula be to estimate the cost of leasing within the relevant range?
(a)         . total lease cost = $456 + ($38.20 × machine hours)
4) What would the estimate of Okafor Company's total lease cost be at a level of 500 machine hours?
(b)	$19,556		456+(38.2*500)
Figure 3-4.
Total utility cost = $1,200 + ($8.10 × labor hours)
5)	Calculate the total variable utility cost for the month of April.
	8.1*775	6277.5
	Option ©
6)	Labour hours = 775
	Total utility cost for month of april= 1200+(8.1*775)				7477.5
	Option (a)
7)	Labour hours = 9600
	Total utility cost = 1200+(8.1*9600)				78960
	Option (b)
Figure 3-5
8)	Variable cost per unit	(11400-10200)/(610-510)			12
	Fixed cost
	Total cost	11400
	(-) Variable cost (1200*12)	7320.00
	Option (a)	4080.00
9)	total janitorial cost be at a level of 600 machine hours?
	Total cost = 4080+(600*12)	11280
	Option (a)
Figure 3-7
10)	Using the results of regression, calculate the fixed cost of maintenance.
	The cost formula for maintenance was
	1150+(9.06*machine hours)
	Here we want to find fixed cost :
	Variable cost per unit	(4686-3956)/(386-310)			0
	Fixed cost
	Total cost	4686
	(-) Variable cost (386*9.6052)	3707.63
		978.37
	Option c is correct