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WorksheetsMA1 Cost Classification
Total questions: 20
Worksheet time: 22mins
The valuation department of a large firm of surveyors wishes to develop a method of predicting its total costs in a period. In a period when the firm undertook 420 valuations, the total costs were £82,200 and in a period when the firm undertook 515 valuations, the total costs were £90,275. The total costs for a period could therefore be represented by
41,350+(95 x number of valuations in the period)
46,500−(85 × number of valuations in the period)
42,300−(95 × number of valuations in the period)
46,500+(85 x number of valuations in the period)
Costs and output for the Leech factory have the following linear relationship. Y=2,120+6x.
Output for 20X0 is 420 units. What are total costs?
(a)
Which two of the following are most likely to be variable?
Annual salary of chief accountant.
Annual salary of factory supervisor.
Direct materials for production.
Telephone bill.
Production line employee's wages.
A cost which contains both fixed and variable components, and so is partly affected by changes in activity level, is known as a (a)
Match the following
Fixed Cost/unit
Variable Cost/unit
Total Semi-Variable Cost
Stepped Cost/unit
Variable costs are conventionally deemed to (a) in total when production volume (b)
Organize these options into the right categories
Raw Materials
Skilled Worker's Wages
Royalty fees/unit
Supervisor's salary
Factory Maintenance
Label the following graphs:
A factory's electricity cost consists of a base charge of $2,000/month plus $0.20/kWh. What is the total electricity cost if 6,000 kWh are consumed?
$3200
$3000
$2200
$2500
A company incurs a step-fixed cost that increases by $10,000 after every 5,000 units produced, and a variable cost of $1 per unit. If the total cost at 5,000 units is $30,000, what is the total cost at 13,000 units?
$58000
$53000
$63000
$78000
Production costs of product Z have been classified in various ways, as follows:
· Prime costs: $51.90 per unit
· Variable costs: $56.86 per unit
· Fixed overheads: $14.50 per direct labour hour
· Direct labour: 3.1 hours per unit at $11.00 per hour
· Variable overheads: $1.60 per direct labour hour
· Direct materials: $17.80 per unit
What is the total production cost per unit of product Z?
$108.26
$116.03
$158.67
$101.81
A company incurs the following monthly costs:
· Rent for factory building: $5,000
· Salaries of administrative staff: $8,000
· Raw materials: $12,000
· Utilities (electricity and water): $3,000 (of which $2,000 is variable)
· Insurance for equipment: $1,200
· Commission to sales staff: $1,500
What is the total amount of fixed costs for the company per month?
$17,200
$16,700
$14,000
$15,200
A consulting firm provides project management services to clients. The firm incurs the following costs:
a) Salaries of consultants working directly on client projects
b) Training costs for consultants to improve overall skills
c) Travel expenses for consultants visiting clients
d) Salaries of HR and administrative staff
Which of the following costs would be classified as direct costs for the firm?
a and c only
a , b and c only
b , c and d only
All of the Above
Which of the following statements regarding cost behaviour are true?
Rent and rates are usually considered to be fixed costs
For decision making purposes, semi-variable costs are ignored
Labour costs are always considered to be variable
Fixed overhead absorption is irrelevant when making decisions
In the long run, most fixed costs are variable
Metro Movers is a logistics company that transports office furniture. The total monthly operating cost varies with the number of delivery jobs completed, though some costs remain fixed (like vehicle leases and warehouse rent).
The following cost data was recorded:
In February, the company completed 400 deliveries, and the total cost was $18,000.
In May, the company completed 1,000 deliveries, and the total cost was $30,000.
Using the high-low method, calculate The estimated total cost if the company completes 700 deliveries in a future month
What will be the total cost at 8000 machine hours?
$26,000
A company uses the simple high-low method to estimate its cost behavior. During the past year, the company experienced its highest level of activity in June and its lowest in December. However, the accountant notes that June included unusually high overtime costs, and December had unexpected machine downtime.
Which of the following is the most appropriate criticism of using the high-low method in this situation?
The method requires complex statistical software to calculate cost behavior accurately.
The high-low method cannot be used if the activity levels are not consistent every month.
The method may lead to inaccurate estimates because it relies only on the two extreme data points, which may be outliers.
The method assumes that fixed costs change with the level of activity, which is unrealistic.
What is the primary assumption behind using the high-low method to estimate costs?
Costs increase proportionally with profits
All costs are fixed at the highest activity level
The relationship between cost and activity is linear
Variable costs only apply at high production levels
True or False:
Using the high-low method, the fixed cost can be calculated by subtracting total variable cost from total cost at either the high or low activity level
True
False
Examine the provided mixed costs graph. Identify the point on the graph from which the total fixed costs can be determined
