Question

#1

Starfun Toys, Inc. Cost of Materials
Number of toys produced	Total cost of materials
60,000	$24,000
120,000	48,000
150,000	60,000

What is the materials cost per unit of output?

a.$0.40

b.$0.16

c.$0.20

d.$0.80

#2

Lassiter Toys, Inc. Cost of Materials
No. of toys produced	Total cost of materials
100,000	$20,000
200,000	40,000
300,000	60,000

The cost behavior of the materials cost is:

a.committed.

b.variable.

c.fixed.

d.discretionary.

#3

Glascro 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 as follows:

Month	Lease cost	Machine hours
April	$15,000	800
May	10,000	600
June	12,000	770
July	16,000	1,000

What would be the total lease cost of Glascro Company at a level of 500 machine hours?

a.$20,000

b.$16,000

c.$8,500

d.$17,450

Answer 1

1. Materials cost per unit = 24,000/60,000 = 0.40 (Option A)

2. Materials cost per unit = 20,000/100,000 = 0.20 = 60,000/300,000 = 0.20 As the materials cost per unit is same for different levels of output, the cost behaviour is VARIABLE Option B

3. Variable cost = (Cost at highest activity - Cost at lowest activity) /(Highest activity-Lowest activity) = (16,000-10,000)/(1000-600) = 15 Fixed cost = 16,000 - (1000*15) = 1000 Total Cost = (15*500) + 1000 = 8500 (Option C)