Question 1

Using the account classification method, estimating the change in variable costs involve three steps.Which of the following is correct?

Accepted Answer

A) I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
III)Divide (2) by the change in activity to estimate the total controllable cost. 
B) I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
III)Multiply (2) by the change in activity to estimate the total controllable cost. 
C) I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
III)Divide (2) by the change in activity to estimate the total controllable cost. 
D) I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
III)Multiply (2) by the change in activity to estimate the total controllable cost. 
A) I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
III)Divide (2) by the change in activity to estimate the total controllable cost. 
B) I.Sum the costs classified as fixed to obtain the total fixed costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit fixed cost.
III)Multiply (2) by the change in activity to estimate the total controllable cost. 
C) I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Multiply the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
III)Divide (2) by the change in activity to estimate the total controllable cost. 
D) I.Sum the costs classified as variable to obtain the total variable costs for the most recent period. II.Divide the amount in (I) by the volume of activity for the corresponding period to estimate the unit variable cost.
III)Multiply (2) by the change in activity to estimate the total controllable cost. D

Question 2

When constructing segmented statements, we use the term segment in a narrow sense.

Accepted Answer

A) True 
 B)False  False

Question 3

Using the high-low method, managers use the two observations pertaining to the highest and lowest activity levels because these values are most likely to define any abnormal costs.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following is not an example of a segment?

Accepted Answer

A) Product. 
B) Customer. 
C) Geographical region. 
D) A Store 
E) All of the above could be segments of a firm. 
A) Product. 
B) Customer. 
C) Geographical region. 
D) A Store 
E) All of the above could be segments of a firm.

Question 5

Trish's Quilt Connection is an on-line company specializing in high-quality quilt frames and accessories.Trish does not charge customers shipping charges for quilt frame orders.She has provided the following information; $\begin{array}{lcr}
\text { Month } & \text { Quilt Frames Sold } & \text { Shipping Costs } \
\text { January } & 1,075 & \$ 8,800 \
\text { February } & 780 & \$ 8,000 \
\text { March } & 1,150 & \$ 9,000 \
\text { April } & 1,280 & \$ 10,000
\end{array}$ Using the high-low method, estimate Trish's total variable and fixed costs are at if she sells 1,280 frames:

Accepted Answer

A) Total variable cost=$5,120; Total Fixed Cost $4,880 
B) Total variable cost=$320; Total Fixed Cost $9,680 
C) Total variable cost=$10,000; Total Fixed Cost $0 
D) Total variable cost=$2,000; Total Fixed Cost $8,000 
E) Total variable cost=$7,500; Total Fixed Cost $500 
A) Total variable cost=$5,120; Total Fixed Cost $4,880 
B) Total variable cost=$320; Total Fixed Cost $9,680 
C) Total variable cost=$10,000; Total Fixed Cost $0 
D) Total variable cost=$2,000; Total Fixed Cost $8,000 
E) Total variable cost=$7,500; Total Fixed Cost $500

Question 6

Fixed costs are relevant for decisions involving increasing or decreasing production volumes.

Accepted Answer

A) True 
 B)False

Question 7

Many firms do not choose to use the account classification method because:

Accepted Answer

A) It is time consuming to implement. 
B) It is subjective in nature. 
C) It does not provide very accurate estimates. 
D) Both a and b. 
E) Both b and c. 
A) It is time consuming to implement. 
B) It is subjective in nature. 
C) It does not provide very accurate estimates. 
D) Both a and b. 
E) Both b and c.

Question 8

In a contribution margin statement, profit before taxes is calculated by:

Accepted Answer

A) Subtracting common fixed costs from segment (product) margin. 
B) Subtracting traceable fixed costs from contribution margin. 
C) Subtracting variable costs from contribution margin. 
D) Subtracting contribution margin from Segment (product) margin. 
E) Subtracting common fixed costs from contribution margin. 
A) Subtracting common fixed costs from segment (product) margin. 
B) Subtracting traceable fixed costs from contribution margin. 
C) Subtracting variable costs from contribution margin. 
D) Subtracting contribution margin from Segment (product) margin. 
E) Subtracting common fixed costs from contribution margin.

Question 9

Common fixed costs do not relate to any product in particular but to the entire business.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is not true?

Accepted Answer

A) The high-low method is a non-statistical method; regression analysis is a statistical method. 
B) The high-low method and regression analysis use only two observations to estimate fixed and variable costs. 
C) The mechanics of regression analysis are complex; the mechanics of the high-low method are simple. 
D) Both A and B are untrue. 
E) A, B and C are untrue. 
A) The high-low method is a non-statistical method; regression analysis is a statistical method. 
B) The high-low method and regression analysis use only two observations to estimate fixed and variable costs. 
C) The mechanics of regression analysis are complex; the mechanics of the high-low method are simple. 
D) Both A and B are untrue. 
E) A, B and C are untrue.

Question 11

P-value:

Accepted Answer

A) Is not useful in interpreting the results of regression analysis. 
B) Indicates the goodness-of-fit. 
C) Is a residual number obtained when using the high-low method. 
D) Indicates the confidence that the coefficient estimates reliably differ from zero. 
E) Both b and c. 
A) Is not useful in interpreting the results of regression analysis. 
B) Indicates the goodness-of-fit. 
C) Is a residual number obtained when using the high-low method. 
D) Indicates the confidence that the coefficient estimates reliably differ from zero. 
E) Both b and c.

Question 12

The contribution margin is the amount that contributes toward recovering fixed costs and earning a profit.

Accepted Answer

A) True 
 B)False

Question 13

The contribution margin statement groups costs by their function.

Accepted Answer

A) True 
 B)False

Question 14

Most firms rely on future data to estimate their cost structure.

Accepted Answer

A) True 
 B)False

Question 15

In the short run:

Accepted Answer

A) Most fixed costs are controllable 
B) Most fixed costs are not controllable 
C) Most variable costs are not controllable 
D) Both fixed costs and variable costs are controllable 
E) Neither fixed costs nor variable costs are controllable 
A) Most fixed costs are controllable 
B) Most fixed costs are not controllable 
C) Most variable costs are not controllable 
D) Both fixed costs and variable costs are controllable 
E) Neither fixed costs nor variable costs are controllable

Question 16

Contribution margin equals revenues less variable costs.

Accepted Answer

A) True 
 B)False

Question 17

The high-low method avoids the need to classify individual cost items as fixed or variable.

Accepted Answer

A) True 
 B)False

Question 18

A major drawback of using regression analysis is that the technique makes a number of assumptions about the data, and accounting data sometimes do not satisfy these assumptions.

Accepted Answer

A) True 
 B)False

Question 19

R-square will always lie between negative one and positive one.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is not true concerning the segmented contribution margin statement?

Accepted Answer

A) The contribution margin statement may be organized by product. 
B) The statement begins with sales volume and revenue. 
C) The statement does not present cost of goods sold. 
D) Variable and fixed costs are shown separately. 
E) All of the above statements are true. 
A) The contribution margin statement may be organized by product. 
B) The statement begins with sales volume and revenue. 
C) The statement does not present cost of goods sold. 
D) Variable and fixed costs are shown separately. 
E) All of the above statements are true.

Using the account classification method, estimating the change in variable costs involve three steps.Which of the following is correct?

When constructing segmented statements, we use the term segment in a narrow sense.

Using the high-low method, managers use the two observations pertaining to the highest and lowest activity levels because these values are most likely to define any abnormal costs.

Which of the following is not an example of a segment?

Fixed costs are relevant for decisions involving increasing or decreasing production volumes.

Many firms do not choose to use the account classification method because:

In a contribution margin statement, profit before taxes is calculated by:

Common fixed costs do not relate to any product in particular but to the entire business.

Which of the following statements is not true?

P-value:

The contribution margin is the amount that contributes toward recovering fixed costs and earning a profit.

The contribution margin statement groups costs by their function.

Most firms rely on future data to estimate their cost structure.

In the short run:

Contribution margin equals revenues less variable costs.

The high-low method avoids the need to classify individual cost items as fixed or variable.

A major drawback of using regression analysis is that the technique makes a number of assumptions about the data, and accounting data sometimes do not satisfy these assumptions.

R-square will always lie between negative one and positive one.

Which of the following statements is not true concerning the segmented contribution margin statement?

Accounting: Information for Decision Making

Identifying and Estimating Costs and Benefits

Cost Flows and Cost Terminology

Cost-Volume-Profit Analysis

Decision Making in the Short Term

Operating Budgets: Bridging Planning and Control

Budgetary Control and Variance Analysis

Cost Allocations

Activity-Based Costing Management

Capital Budgeting

Performance Evaluation in Decentralized Organizations

Strategic Planning and Control

Job-Costing Systems

Process-Costing Systems

Refining Systems: Support Activity

Filters

Exam 4: Techniques for Estimating Fixed and Variable Costs

Using the account classification method, estimating the change in variable costs involve three steps.Which of the following is correct?

When constructing segmented statements, we use the term segment in a narrow sense.

Using the high-low method, managers use the two observations pertaining to the highest and lowest activity levels because these values are most likely to define any abnormal costs.

Which of the following is not an example of a segment?

Fixed costs are relevant for decisions involving increasing or decreasing production volumes.

Many firms do not choose to use the account classification method because:

In a contribution margin statement, profit before taxes is calculated by:

Common fixed costs do not relate to any product in particular but to the entire business.

Which of the following statements is not true?

P-value:

The contribution margin is the amount that contributes toward recovering fixed costs and earning a profit.

The contribution margin statement groups costs by their function.

Most firms rely on future data to estimate their cost structure.

In the short run:

Contribution margin equals revenues less variable costs.

The high-low method avoids the need to classify individual cost items as fixed or variable.

A major drawback of using regression analysis is that the technique makes a number of assumptions about the data, and accounting data sometimes do not satisfy these assumptions.

R-square will always lie between negative one and positive one.

Which of the following statements is not true concerning the segmented contribution margin statement?

Accounting: Information for Decision Making

Identifying and Estimating Costs and Benefits

Cost Flows and Cost Terminology

Cost-Volume-Profit Analysis

Decision Making in the Short Term

Operating Budgets: Bridging Planning and Control

Budgetary Control and Variance Analysis

Cost Allocations

Activity-Based Costing Management

Capital Budgeting

Performance Evaluation in Decentralized Organizations

Strategic Planning and Control

Job-Costing Systems

Process-Costing Systems

Refining Systems: Support Activity

Filters