Cost Management Paper 6


Lar Company has found that its total electricity cost has both a fixed component and a variable component within the relevant range. The variable component seems to vary directly with the number of units produced. Which one of the following statements concerning Lar’s electricity cost is incorrect?


The least exact method for separating fixed and variable costs is


A company prepares a budget each month for manufacturing costs. Formulas have been developed for all costs within a relevant range of 5,000 to 15,000 units per month. The budget for electricity (a semi variable cost) is $19,800 at 9,000 units per month, and $21,000 at 10,000 units per month. How much should be budgeted for electricity for the coming month if 12,000 units are to be produced?


Brogan Co. operated four sales offices last year. Brogan’s costs were $400,000, of which $60,000 were fixed. Brogan’s total costs are significantly influenced by the number of sales offices it operates. Using last year’s costs as the basis for predicting annual costs, what would the budgeted costs be if Brogan operated six sales offices?


Waggoner Company produces a product that contains 9 ounces of materials in each unit of finished goods. During the production process, 4% of the materials evaporate. Waggoner pays its suppliers $2 per ounce; the cost to ship the material to the company averages $0.20 per ounce. The standard dollar amount of raw materials contained in one unit of finished goods is


Committed costs are


Discretionary costs are costs that


Controllable costs are costs that


In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold to maximize profits?


The assignment of raw material costs to the major end products resulting from refining a barrel of crude oil isbest described as


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