Exam 3: Measurement of Cost Behavior

An algebraic equation used by managers to describe the relationship between a cost and its cost driver(s) is called a:

Costs that may be essential to the long- run achievement of the organization's goals, but that managers can almost reduce to zero in the short run, are called:

A property tax is an example of a(n):

An activity analysis is used to:

Costs that change abruptly at intervals of activity because the resources and their costs come in indivisible chunks are called:

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

One of the reasons why cost functions are important is to help managers make proper long- run decisions.

Discretionary fixed costs have obvious relationships with levels of capacity or output activity.

In a mixed- cost function, the intercept is:

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

Costs arising from the possession of facilities, equipment, and a basic organization are:

The Kojak Company used regression analysis to predict the annual cost of utilities. The results were as follows: Utilities Cost Explained by Direct Labor Hours Constant \ 9,650 Standard error of Y estimate \ 875.20 R - squared 0.7650 No. of obs ervations 33 Degrees of freedom 31 X coefficient(s) 4.43 Standard error of coefficient(s) 0.917 The variable cost per direct labor hour is:

The Brady 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 Constant \ 13,885 Standard error of Y estimate \ 9,560 R - squared 0.7832 No. of observations 22 Degrees of freedom 20 X coefficient (s) 11.75 Standard error of coefficient(s) 2.1876 The total fixed cost is:

Managers cannot alter discretionary fixed costs easily.

Given the following four cost behaviors and expected levels of cost- driver activity, predict total costs. a. Fuel costs of driving vehicles, $0.37 per mile, driven 20,000 mile per month b. Computer rental cost, $500 per piece of equipment per month for three computers for four months c. Crew supervisors' costs, where a new supervisor is hired for each 10 workers employed; the supervisors are paid $50,000 per year and there were 82 workers employed. d. Purchasing department cost for 4,000 orders in one month. Its cost function is $8,000 per month plus $7 per material order processed.

The Strongsville Recreation Center is planning its annual fundraiser. The event committee has developed the following budget for the event. Ballroom rental \ 1,900 Entertainment \ 2,500 Printing \ 500+\ 7 per guest Food \ 25 per guest Decorations and favors \ 800+\ 3 per guest The committee expects that 3,000 people will attend the event. a. Compute the fixed and variable components of the maintenance department costs using the high- low method. b. Prepare the cost function. c. If Strongsville Recreation Center charges $200 per person, how much money will be raised by this event?

Cost prediction is used to:

Presented below is the production data for the first six months of the year for the mixed costs incurred by Strongsville Company. Month Cost Units January \ 7,500 4,000 February 13,000 6,500 March 10,500 8,000 April 12,700 10,500 May 13,500 12,000 June 10,850 9,000 Strongsville Company uses the high- low method to analyze mixed costs. The variable cost per unit is:

An example of a volume- driven cost in making a textbook is the salaries of the editorial staff.

Selecting a volume- related cost driver and classifying each account as a variable cost or a fixed cost is called: