Exam 3: Cost Behavior

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The cost of raw materials used is usually a fixed cost.

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Blacken Company manufactures motorcycles.The company's management accountant wants to calculate the fixed and variable costs associated with utility cost incurred by the factory.Data for the past six months were collected. Blacken Company manufactures motorcycles.The company's management accountant wants to calculate the fixed and variable costs associated with utility cost incurred by the factory.Data for the past six months were collected.

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Figure 3-11. The following four months of data were collected on utility cost and the number of labor hours in a factory. Figure 3-11. The following four months of data were collected on utility cost and the number of labor hours in a factory.   Refer to Figure 3-11.What would be the estimate of electricity cost if the factory incurred 4,700 labor hours next month? Refer to Figure 3-11.What would be the estimate of electricity cost if the factory incurred 4,700 labor hours next month?

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__________________ is the general term for describing whether a cost changes when the level of output changes.

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Figure 3-3. Okafor 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. Figure 3-3. Okafor 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.   Refer to Figure 3-3.What would Okafor Company's cost formula be to estimate the cost of leasing within the relevant range? Refer to Figure 3-3.What would Okafor Company's cost formula be to estimate the cost of leasing within the relevant range?

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A discretionary fixed cost can be changed relatively easily at management discretion.

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A type of cost behavior where the true total cost function is increasing at a decreasing rate is called ______________.

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Figure 3-7. Margola Company produces hand-held calculators.The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory.Data for the past four months were collected. Figure 3-7. Margola Company produces hand-held calculators.The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory.Data for the past four months were collected.   Coefficients shown by a regression program are:   Refer to Figure 3-7.Using the results of regression,the cost formula for maintenance cost was Coefficients shown by a regression program are: Figure 3-7. Margola Company produces hand-held calculators.The company controller wanted to calculate the fixed and variable costs associated with the maintenance cost incurred by the factory.Data for the past four months were collected.   Coefficients shown by a regression program are:   Refer to Figure 3-7.Using the results of regression,the cost formula for maintenance cost was Refer to Figure 3-7.Using the results of regression,the cost formula for maintenance cost was

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The _________________________ is a way to see the cost relationship by plotting the data points on a graph.

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Consider each of the following independent situations. Consider each of the following independent situations.    Required: For each situation,describe the cost as one of the following: fixed cost,variable cost,mixed cost,or step cost. Required: For each situation,describe the cost as one of the following: fixed cost,variable cost,mixed cost,or step cost.

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If output increases by 50% and is still within the relevant range

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Graphically,the ______________ is the point at which the cost line intercepts the cost (vertical)axis.

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The high-low method is an objective method to separate the cost behavior of a mixed cost.

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Just Burn It! Manufactures blank CDs.The company incurs $22,000 in monthly depreciation costs on its manufacturing equipment as well as monthly advertising costs of $2,000 to place ads in newspapers and on the radio.Each CD requires materials and manufacturing overhead resources.On average the company uses 26,000 pounds of material to manufacture 12,000 CDs per month.Each pound of material costs $2.50.The manufacturing overhead is driven by machine hours and on average the company incurs $30,000 in manufacturing overhead to produce 12,000 CDs per month. Just Burn It! Manufactures blank CDs.The company incurs $22,000 in monthly depreciation costs on its manufacturing equipment as well as monthly advertising costs of $2,000 to place ads in newspapers and on the radio.Each CD requires materials and manufacturing overhead resources.On average the company uses 26,000 pounds of material to manufacture 12,000 CDs per month.Each pound of material costs $2.50.The manufacturing overhead is driven by machine hours and on average the company incurs $30,000 in manufacturing overhead to produce 12,000 CDs per month.

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An advantage of the high-low method is that it is ___________. or or

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A mixed cost

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Which of the following would probably be a committed fixed cost for an accounting firm?

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The range of output over which the assumed cost relationship is valid for normal operations of a firm is called the

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Select the best description for the following: Select the best description for the following:

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Figure 3-9. The following cost formula was developed using monthly data for a retail clothing store. Total cost = $75,620 + ($242 ´ number of customers) Refer to Figure 3-9.The term "number of customers"

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