Davis Ltd Has Observed That at an Activity Level of 10

question 3

Multiple Choice

Davis Ltd has observed that at an activity level of 10 000 units the maintenance cost is $22 000, and at 20 000 units the maintenance cost is $28 000. Using the high-low method, the cost formula for maintenance is:

• A) $16 000 + $.60 x units.
• B) $16 000 + $.1.54 x units.
• C) $6 000 + $.60 x units.
• D) $1.40/unit.

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Definitions:

Monetary Transfers

Financial transactions that involve the movement of money from one party to another, which can be domestic or international in nature.

Fund Balance―Nonspendable

The portion of a government's fund balance that cannot be spent because it is either not in spendable form or legally or contractually required to be maintained intact.

General Fund

A primary accounting fund used by a government to record its general operating revenues and expenses.

Fund Balance

The net assets of a governmental fund calculated as the difference between fund assets and liabilities, reflecting the financial position of the fund.