Question 1

Explain the difference between a committed and a discretionary fixed cost.

Accepted Answer

A committed fixed cost is normally uncha

Question 2

Why is managerial judgment essential to predicting cost behavior?

Accepted Answer

Managerial judgment is important because

Question 3

Figure 3-4. Botana Company constructed the following formula for monthly utility cost.
Total utility cost = $1,200 + ($8.10 ´ labor hours)
Assume that 775 labor hours are budgeted for the month of April.
Refer to Figure 3-4.If Botana Company incurs 9,600 labor hours for the year,what would be the estimate of total utility cost?

Accepted Answer

A) $76,560 
B) $78,960 
C) $92,160 
D) none of these are correct 
A) $76,560 
B) $78,960 
C) $92,160 
D) none of these are correct

Question 4

Graber and Johnson,Attorney's at Law,recently opened a law practice in the Northwest.Their goal is to generate a monthly net income of $10,000.They have initially set their billing rate at $150 per hour.Their billable hours in the first month of operations (January)were 150 and in the second month of operations (February),175 billable hours.The costs incurred at these levels for January and February are given below.

Accepted Answer

The answer of Graber and Johnson,Attorney's at Law,recently opened a...

Question 5

Figure 3-13. The following six months of data were collected on electricity cost and the number of machine hours in a factory.
  Refer to Figure 3-13.An independent variable value used in calculating the cost line using the high-low method is:

Accepted Answer

A) $27,950 
B) 5,430 
C) $25,160 
D) 4,000 
A) $27,950 
B) 5,430 
C) $25,160 
D) 4,000

Question 6

Figure 3-10. The following cost formula was developed using the monthly data for an accounting firm.
Total cost = $87,100 + ($210 ´ number of tax returns)
Refer to Figure 3-10.The term "total cost"

Accepted Answer

A) is the independent variable. 
B) is the dependant variable. 
C) is the intercept. 
D) is the variable rate. 
A) is the independent variable. 
B) is the dependant variable. 
C) is the intercept. 
D) is the variable rate.

Question 7

If a cost's step-cost behavior follows very narrow steps,the costs may be approximated using:

Accepted Answer

A) straight variable cost assumptions. 
B) fixed costs assumptions. 
C) step-fixed cost assumptions. 
D) mixed cost assumptions. 
A) straight variable cost assumptions. 
B) fixed costs assumptions. 
C) step-fixed cost assumptions. 
D) mixed cost assumptions.

Question 8

Using a linear regression program,the term 'Intercept' refers to the variable cost.

Accepted Answer

A) True 
 B)False

Question 9

Figure 3-8. Martin Company makes cell phones.The company controller wanted to calculate the fixed and variable costs associated with electricity use in the factory.Data for the past four months were collected.
  Coefficients shown by a regression program are:
  Refer to Figure 3-8.Using the results of regression,calculate the variable rate of the electricity cost.

Accepted Answer

A) $9.67 per machine hour 
B) $9.48 per machine hour 
C) $2,255 per machine hour 
D) none of these are correct 
A) $9.67 per machine hour 
B) $9.48 per machine hour 
C) $2,255 per machine hour 
D) none of these are correct

Question 10

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,what would be the budgeted cost for maintenance next month assuming that 340 machine hours are budgeted?

Accepted Answer

A) $4,230 
B) $3,928 
C) $1,150 
D) $2,943 
A) $4,230 
B) $3,928 
C) $1,150 
D) $2,943

Question 11

Figure 3-14. 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 five months were collected.
  Refer to Figure 3-14.Using a regression program,the value of the intercept (rounded to the nearest penny)is

Accepted Answer

A) $.99. 
B) $195.35. 
C) $10,630.80. 
D) $190,267.00. 
A) $.99. 
B) $195.35. 
C) $10,630.80. 
D) $190,267.00.

Question 12

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.Using the high-low method,compute the variable rate for the utility cost.

Accepted Answer

A) $1.02 
B) $2.80 
C) $1.07 
D) $2.00 
A) $1.02 
B) $2.80 
C) $1.07 
D) $2.00

Question 13

If an automobile manufacturer changes from skilled labor to computer-controlled assembly procedures,the past data

Accepted Answer

A) are useful in predicting future costs. 
B) are of little or no value in predicting future costs. 
C) should be used without adjustments to predict future costs. 
D) are representative of future costs. 
A) are useful in predicting future costs. 
B) are of little or no value in predicting future costs. 
C) should be used without adjustments to predict future costs. 
D) are representative of future costs.

Question 14

Figure 3-14. 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 five months were collected.
  Refer to Figure 3-14.Using a regression program,the forecasted utility cost at 2,300 machine hours (rounded to the nearest dollar)is

Accepted Answer

A) $30,940. 
B) $37,116. 
C) $25,945. 
D) $10,631. 
A) $30,940. 
B) $37,116. 
C) $25,945. 
D) $10,631.

Question 15

If at a given volume total costs and fixed costs are known,the variable costs per unit may be computed as follows:

Accepted Answer

A) (total costs - fixed costs)/unit volume 
B) (total costs/unit volume)- fixed costs 
C) (total costs ´ unit volume)- (fixed costs/unit volume) 
D) total costs - (fixed costs/unit volume) 
A) (total costs - fixed costs)/unit volume 
B) (total costs/unit volume)- fixed costs 
C) (total costs ´ unit volume)- (fixed costs/unit volume) 
D) total costs - (fixed costs/unit volume)

Question 16

Tamo Company used an Excel spreadsheet program to run ordinary least squares on a set of cost data for its utility cost.The cost driver for labor cost is employee hours.The following results were produced.
   Required:

Accepted Answer

The answer of Tamo Company used an Excel spreadsheet program...

Question 17

Figure 3-12. The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance.The following computer output was received:
  The driver used was the number of machine hours.
Refer to Figure 3-12.What was the cost formula for equipment maintenance?

Accepted Answer

A) total maintenance cost = $25 ´ machine hours 
B) total maintenance cost = $32,000 
C) total maintenance cost = $32,000 + ($25 ´ machine hours) 
D) none of these are correct 
A) total maintenance cost = $25 ´ machine hours 
B) total maintenance cost = $32,000 
C) total maintenance cost = $32,000 + ($25 ´ machine hours) 
D) none of these are correct

Question 18

The average unit cost at a monthly volume of 9,000 units is $3,and the average unit cost at a monthly volume of 22,500 units is $2.10.
Required:

Accepted Answer

The answer of The average unit cost at a monthly...

Question 19

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.Using the high-low method calculate the fixed cost of leasing

Accepted Answer

A) $482 
B) $516 
C) $420 
D) $456 
A) $482 
B) $516 
C) $420 
D) $456

Question 20

Why would cost behavior change outside of the relevant range?

Accepted Answer

The relevant range is the normal range o

Explain the difference between a committed and a discretionary fixed cost.

Why is managerial judgment essential to predicting cost behavior?

Figure 3-13. The following six months of data were collected on electricity cost and the number of machine hours in a factory. Refer to Figure 3-13.An independent variable value used in calculating the cost line using the high-low method is:

Figure 3-10. The following cost formula was developed using the monthly data for an accounting firm. Total cost = $87,100 + ($210 ´ number of tax returns) Refer to Figure 3-10.The term "total cost"

If a cost's step-cost behavior follows very narrow steps,the costs may be approximated using:

Using a linear regression program,the term 'Intercept' refers to the variable cost.

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.Using the high-low method,compute the variable rate for the utility cost.

If an automobile manufacturer changes from skilled labor to computer-controlled assembly procedures,the past data

If at a given volume total costs and fixed costs are known,the variable costs per unit may be computed as follows:

Tamo Company used an Excel spreadsheet program to run ordinary least squares on a set of cost data for its utility cost.The cost driver for labor cost is employee hours.The following results were produced. Required:

Figure 3-12. The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance.The following computer output was received: The driver used was the number of machine hours. Refer to Figure 3-12.What was the cost formula for equipment maintenance?

The average unit cost at a monthly volume of 9,000 units is $3,and the average unit cost at a monthly volume of 22,500 units is $2.10. Required:

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.Using the high-low method calculate the fixed cost of leasing

Why would cost behavior change outside of the relevant range?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

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Exam 3: Cost Behavior

Explain the difference between a committed and a discretionary fixed cost.

Why is managerial judgment essential to predicting cost behavior?

Figure 3-13. The following six months of data were collected on electricity cost and the number of machine hours in a factory. Refer to Figure 3-13.An independent variable value used in calculating the cost line using the high-low method is:

Figure 3-10. The following cost formula was developed using the monthly data for an accounting firm. Total cost = $87,100 + ($210 ´ number of tax returns) Refer to Figure 3-10.The term "total cost"

If a cost's step-cost behavior follows very narrow steps,the costs may be approximated using:

Using a linear regression program,the term 'Intercept' refers to the variable cost.

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.Using the high-low method,compute the variable rate for the utility cost.

If an automobile manufacturer changes from skilled labor to computer-controlled assembly procedures,the past data

If at a given volume total costs and fixed costs are known,the variable costs per unit may be computed as follows:

Tamo Company used an Excel spreadsheet program to run ordinary least squares on a set of cost data for its utility cost.The cost driver for labor cost is employee hours.The following results were produced. Required:

Figure 3-12. The method of least squares was used to develop a cost equation to predict the cost of monthly equipment maintenance.The following computer output was received: The driver used was the number of machine hours. Refer to Figure 3-12.What was the cost formula for equipment maintenance?

The average unit cost at a monthly volume of 9,000 units is $3,and the average unit cost at a monthly volume of 22,500 units is $2.10. Required:

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.Using the high-low method calculate the fixed cost of leasing

Why would cost behavior change outside of the relevant range?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing,and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Statement of Cash Flows

Financial Statement Analysis

Filters