Question 1

An example of a committed fixed cost is insurance.

Accepted Answer

A) True 
 B)False

Question 2

The cost of using the telephone, which involves a flat rate per month plus a fee for extra usage, would be considered a:

Accepted Answer

A)  mixed cost 
B)  fixed cost 
C)  variable cost 
D)  step cost 
A)  mixed cost 
B)  fixed cost 
C)  variable cost 
D)  step cost

Question 3

Accountants sometimes use a linear cost model for nonlinear costs because:

Accepted Answer

A)  the cost of using more accurate models may exceed the benefit of greater accuracy 
B)  a nonlinear model is too difficult to develop 
C)  a nonlinear model is too difficult for managers to interpret 
D)  All of these answers are correct. 
A)  the cost of using more accurate models may exceed the benefit of greater accuracy 
B)  a nonlinear model is too difficult to develop 
C)  a nonlinear model is too difficult for managers to interpret 
D)  All of these answers are correct.

Question 4

Managers can vary spending levels broadly in the short run.

Accepted Answer

A) True 
 B)False

Question 5

The various methods used to measure cost behavior (e.g., account analysis, high- low) are mutually exclusive.

Accepted Answer

A) True 
 B)False

Question 6

The first step in estimating or predicting costs is cost measurement.

Accepted Answer

A) True 
 B)False

Question 7

The Partridge Corporation used regression analysis to predict the annual cost of indirect materials. The results were as follows: Indirect $ M $ aterials Cost
Explained by Units Produced
$\begin{array}{ll}
\text { Constant } & \$ 21,885 \
\text { Standard err or of Y estimate } & \$ 4,560 \
\text { R - squared } & 0.7832 \
\text { No. of obs ervations } & 22 \
\text { Degrees of freedom } & 20 \
\text { X coefficient(s) } & 9.75 \
\text { Standard error of coefficient(s) } & 4.1876
\end{array}$ The variable cost per unit of product is:

Accepted Answer

A)  $0.78 
B)  $4.19 
C)  $2.20 
D)  $9.75 
A)  $0.78 
B)  $4.19 
C)  $2.20 
D)  $9.75

Question 8

In the mixed cost equation, Y = F + VX, the F is the slope.

Accepted Answer

A) True 
 B)False

Question 9

In relation to a cost function, the term reliability means:

Accepted Answer

A)  whether the cost function conforms to a given mathematical model 
B)  how well the cost function predicts future costs 
C)  how well the cost function explains past cost behavior 
D)  whether the costs and activities can be easily observed 
A)  whether the cost function conforms to a given mathematical model 
B)  how well the cost function predicts future costs 
C)  how well the cost function explains past cost behavior 
D)  whether the costs and activities can be easily observed

Question 10

is a method in which the cost analyst draws a straight line through a plot of all the available data.

Accepted Answer

A)  Engineering analysis 
B)  The least- squares regression method 
C)  Account analysis 
D)  The visual- fit method 
A)  Engineering analysis 
B)  The least- squares regression method 
C)  Account analysis 
D)  The visual- fit method

Question 11

Peace Company makes metal signs for businesses and residences. These signs are made of sheet metal, which the owner paints by hand. The owner has a good sense of his labor and materials cost behavior, but he is concerned that he does not have good measure of other support costs. Currently, he predicts support costs to be 40% of the cost of materials. Close investigation of the business reveals that $10 per direct labor hour is a more plausible and reliable support cost relationship. Consider estimated support costs of the following two signs that Peace Company makes. $\begin{array}{lll}&\text { Small Sign }&\text { Large Sign }\
\text { Materials cost } & \$ 100 & \$ 300 \
\text { Direct labor hours } & 5 & 7 \
\text { Support costs } & 8 & 9
\end{array}$ The amount of support costs assigned to a small sign using direct labor hours as the cost driver is:

Accepted Answer

A)  $80 
B)  $200 
C)  $50 
D)  $90 
A)  $80 
B)  $200 
C)  $50 
D)  $90

Question 12

In the mixed- cost function, Y = $59,000 + $7.70X, the Y signifies:

Accepted Answer

A)  total cost 
B)  variable cost per unit of cost driver 
C)  total fixed cost 
D)  number of units of the cost driver 
A)  total cost 
B)  variable cost per unit of cost driver 
C)  total fixed cost 
D)  number of units of the cost driver

Question 13

Bates Motel's cost function based on guest- days of occupancy for custodial cost is given as: Y = $30,000 + $7.50X. Bates Motel expects an occupancy level of 10,000 guest days. Bates Motel's expected total fixed cost is:

Accepted Answer

A)  $30,000 
B)  $7.50 
C)  $75,000 
D)  $105,000 
A)  $30,000 
B)  $7.50 
C)  $75,000 
D)  $105,000

Question 14

A measurement of how much of the fluctuation of a cost is explained by changes in the cost driver is:

Accepted Answer

A)  coefficient of determination 
B)  standard error of coefficient 
C)  least- squares analysis 
D)  standard error of Y 
A)  coefficient of determination 
B)  standard error of coefficient 
C)  least- squares analysis 
D)  standard error of Y

Question 15

In the equation, Y = $30,000 + $9X, the $30,000 represents fixed costs per unit.

Accepted Answer

A) True 
 B)False

Question 16

Identify the following planned costs as (a) purely variable costs, (b) discretionary fixed costs, (c) committed fixed costs, (d) mixed costs, or (e) step costs.
1. Straight- line depreciation on office furniture.
2. Electricity used in operating equipment.
3. A lump sum amount of advertising costs planned by a local restaurant.
4. Nursing supervisors' salaries (a supervisor is needed for each 10 nursing personnel).
5. Repairs made on computers.
6. Training costs for employees.

Accepted Answer

1. Committed fixed costs
2. Mi

Question 17

Capacity costs are the mixed costs of being able to achieve a desired level of production or service while maintaining product or service attributes.

Accepted Answer

A) True 
 B)False

Question 18

uses statistics to fit a cost function to all the historical data.

Accepted Answer

A)  The high- low method 
B)  Regression analysis 
C)  The visual- fit method 
D)  The coefficient of determination 
A)  The high- low method 
B)  Regression analysis 
C)  The visual- fit method 
D)  The coefficient of determination

Question 19

Identify the following planned costs as (a) purely variable costs, (b) discretionary fixed costs, (c) committed fixed costs, (d) mixed costs, or (e) step costs.
1. Crew supervisor in a small construction company. A new supervisor is needed for every 12 workers employed.
2. Sales commissions based on sales dollars.
3. Compensation of accountants employed internally by a local manufacturing company.
4. Direct labor.
5. Rental payment on a 30- year lease for office space in a private office building.
6. Repairs made on computers in the office.

Accepted Answer

1. Step costs
2. Purely variab

Question 20

When performing an engineering analysis, one must be careful because the observed time period may be abnormal.

Accepted Answer

A) True 
 B)False

An example of a committed fixed cost is insurance.

The cost of using the telephone, which involves a flat rate per month plus a fee for extra usage, would be considered a:

Accountants sometimes use a linear cost model for nonlinear costs because:

Managers can vary spending levels broadly in the short run.

The various methods used to measure cost behavior (e.g., account analysis, high- low) are mutually exclusive.

The first step in estimating or predicting costs is cost measurement.

In the mixed cost equation, Y = F + VX, the F is the slope.

In relation to a cost function, the term reliability means:

is a method in which the cost analyst draws a straight line through a plot of all the available data.

In the mixed- cost function, Y = $59,000 + $7.70X, the Y signifies:

Bates Motel's cost function based on guest- days of occupancy for custodial cost is given as: Y = $30,000 + $7.50X. Bates Motel expects an occupancy level of 10,000 guest days. Bates Motel's expected total fixed cost is:

A measurement of how much of the fluctuation of a cost is explained by changes in the cost driver is:

In the equation, Y = $30,000 + $9X, the $30,000 represents fixed costs per unit.

Capacity costs are the mixed costs of being able to achieve a desired level of production or service while maintaining product or service attributes.

uses statistics to fit a cost function to all the historical data.

When performing an engineering analysis, one must be careful because the observed time period may be abnormal.

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Marketing Decisions

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Filters

Exam 3: Measurement of Cost Behavior

An example of a committed fixed cost is insurance.

The cost of using the telephone, which involves a flat rate per month plus a fee for extra usage, would be considered a:

Accountants sometimes use a linear cost model for nonlinear costs because:

Managers can vary spending levels broadly in the short run.

The various methods used to measure cost behavior (e.g., account analysis, high- low) are mutually exclusive.

The first step in estimating or predicting costs is cost measurement.

In the mixed cost equation, Y = F + VX, the F is the slope.

In relation to a cost function, the term reliability means:

is a method in which the cost analyst draws a straight line through a plot of all the available data.

In the mixed- cost function, Y = $59,000 + $7.70X, the Y signifies:

Bates Motel's cost function based on guest- days of occupancy for custodial cost is given as: Y = $30,000 + $7.50X. Bates Motel expects an occupancy level of 10,000 guest days. Bates Motel's expected total fixed cost is:

A measurement of how much of the fluctuation of a cost is explained by changes in the cost driver is:

In the equation, Y = $30,000 + $9X, the $30,000 represents fixed costs per unit.

Capacity costs are the mixed costs of being able to achieve a desired level of production or service while maintaining product or service attributes.

uses statistics to fit a cost function to all the historical data.

When performing an engineering analysis, one must be careful because the observed time period may be abnormal.

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Marketing Decisions

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Filters