The Following Data Pertain to Activity and Utilities Costs for Two

question 105

Multiple Choice

The following data pertain to activity and utilities costs for two recent years:
$\begin{array}{|l|r|r|}\hline & \text { Year 2 } & \text { Year 1 } \\\hline \text { Activity Level in Units } & 10,000 & 6,000 \\\hline \text { Utilities Cost } & \$ 12,000 & \$ 9,000 \\\hline\end{array}$
Using the high-low method,what is the cost formula for utilities?

• A) $1.20 per unit.
• B) $1.50 per unit.
• C) $3,000 plus $3.00 per unit.
• D) $4,500 plus $0.75 per unit.

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Definitions:

Accrued Liabilities

Expenses that have been incurred but not yet paid, recorded on the balance sheet until they are paid.

Indirect Method

A method of reporting cash flows from operating activities by adjusting net income for changes in balance sheet accounts.

Accounts Receivable

Money owed to a company by its customers for goods or services already delivered but not yet paid for.

Inventory

The complete list of items, such as raw materials, work-in-progress, and finished goods, that a company holds, which are often considered as assets.