Question 1

Measurement of cost behavior means understanding and quantifying how activities of an organization affect its levels of costs.

Accepted Answer

A) True 
 B)False

Question 2

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. $$\begin{array} { l l l } 
& \text { Small Sign } & \text { Large Sign } \
\text { Materials cost } & \$ 200 & \$ 300 \
\text { Direct labor hours } & 5 & 9 \
\text { Support costs } & 8 & 10
\end{array}$$ The amount of support costs assigned to a large sign using number of components as the cost driver is:

Accepted Answer

A)  $50 
B)  $80 
C)  $120 
D)  $90 
A)  $50 
B)  $80 
C)  $120 
D)  $90

Question 3

In the high- low method, the change in total cost is due to:

Accepted Answer

A)  total fixed cost 
B)  mixed cost per unit 
C)  variable cost per unit 
D)  fixed cost per unit 
A)  total fixed cost 
B)  mixed cost per unit 
C)  variable cost per unit 
D)  fixed cost per unit

Question 4

contain elements of both fixed- and variable- cost behavior.

Accepted Answer

A)  Mixed costs 
B)  Discretionary fixed costs 
C)  Step costs 
D)  Committed fixed costs 
A)  Mixed costs 
B)  Discretionary fixed costs 
C)  Step costs 
D)  Committed fixed costs

Question 5

Least- squares regression measures a cost function more objectively (with statistics rather than human eyesight) using the same data.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

A cost function for a mixed cost includes:

Accepted Answer

A)  expected total cost 
B)  fixed cost per unit 
C)  total variable cost 
D)  None of these answers is correct. 
A)  expected total cost 
B)  fixed cost per unit 
C)  total variable cost 
D)  None of these answers is correct.

Question 8

The visual- fit method is more objective than the engineering analysis method.

Accepted Answer

A) True 
 B)False

Question 9

A compensation plan where the sales force is paid salary plus commission is a:

Accepted Answer

A)  mixed cost 
B)  purely variable cost 
C)  discretionary fixed cost 
D)  committed fixed cost 
A)  mixed cost 
B)  purely variable cost 
C)  discretionary fixed cost 
D)  committed fixed cost

Question 10

The high- low method of measuring cost behavior uses estimated costs.

Accepted Answer

A) True 
 B)False

Question 11

Explain the difference between committed fixed costs and discretionary fixed costs and give an example of each.

Accepted Answer

Committed fixed costs usually arise from

Question 12

What are the benefits and disadvantages of the high- low method?

Accepted Answer

The benefits of using high- low method a

Question 13

Managers should apply two principles to obtain accurate and useful cost functions. These principles are:

Accepted Answer

A)  plausibility and believability 
B)  believability and validity 
C)  reliability and validity 
D)  plausibility and reliability 
A)  plausibility and believability 
B)  believability and validity 
C)  reliability and validity 
D)  plausibility and reliability

Question 14

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

Accepted Answer

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

Question 15

A telephone bill, which includes a monthly base rate plus an extra fee for each minute of long- distance service, is an example of a variable cost.

Accepted Answer

A) True 
 B)False

Question 16

This nonstatistical approach is more reliable than the high- low method because it uses all the available data instead of just two points

Accepted Answer

The answer of This nonstatistical approach is more reliable than...

Question 17

Measuring a cost function by looking to the accounting system for information about cost behavior

Accepted Answer

The answer of Measuring a cost function by looking to...

Question 18

Costs that change abruptly at intervals of activity because the resources and their costs are only available in indivisible chunks

Accepted Answer

The answer of Costs that change abruptly at intervals of...

Question 19

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. $\begin{array}{lll}&\text { Small Sign }&\text { Large Sign }\
\text { Materials cost } & \$ 200 & \$ 500 \
\text { Direct labor hours } & 5 & 9 \
\text { Support costs } & ? & ?
\end{array}$ The amount of support costs assigned to a large sign using direct labor hours as the cost driver is:

Accepted Answer

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

Question 20

It may be difficult to trace cost to products and services if the costs are:

Accepted Answer

A)  affected by activities not related to volume and by multiple cost drivers 
B)  volume- driven 
C)  affected by multiple cost drivers 
D)  affected by activities not related to volume 
A)  affected by activities not related to volume and by multiple cost drivers 
B)  volume- driven 
C)  affected by multiple cost drivers 
D)  affected by activities not related to volume

Measurement of cost behavior means understanding and quantifying how activities of an organization affect its levels of costs.

In the high- low method, the change in total cost is due to:

contain elements of both fixed- and variable- cost behavior.

Least- squares regression measures a cost function more objectively (with statistics rather than human eyesight) using the same data.

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

A cost function for a mixed cost includes:

The visual- fit method is more objective than the engineering analysis method.

A compensation plan where the sales force is paid salary plus commission is a:

The high- low method of measuring cost behavior uses estimated costs.

Explain the difference between committed fixed costs and discretionary fixed costs and give an example of each.

What are the benefits and disadvantages of the high- low method?

Managers should apply two principles to obtain accurate and useful cost functions. These principles are:

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

A telephone bill, which includes a monthly base rate plus an extra fee for each minute of long- distance service, is an example of a variable cost.

This nonstatistical approach is more reliable than the high- low method because it uses all the available data instead of just two points

Measuring a cost function by looking to the accounting system for information about cost behavior

Costs that change abruptly at intervals of activity because the resources and their costs are only available in indivisible chunks

It may be difficult to trace cost to products and services if the costs are:

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

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Exam 3: Measurement of Cost Behavior

Measurement of cost behavior means understanding and quantifying how activities of an organization affect its levels of costs.

In the high- low method, the change in total cost is due to:

contain elements of both fixed- and variable- cost behavior.

Least- squares regression measures a cost function more objectively (with statistics rather than human eyesight) using the same data.

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

A cost function for a mixed cost includes:

The visual- fit method is more objective than the engineering analysis method.

A compensation plan where the sales force is paid salary plus commission is a:

The high- low method of measuring cost behavior uses estimated costs.

Explain the difference between committed fixed costs and discretionary fixed costs and give an example of each.

What are the benefits and disadvantages of the high- low method?

Managers should apply two principles to obtain accurate and useful cost functions. These principles are:

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

A telephone bill, which includes a monthly base rate plus an extra fee for each minute of long- distance service, is an example of a variable cost.

This nonstatistical approach is more reliable than the high- low method because it uses all the available data instead of just two points

Measuring a cost function by looking to the accounting system for information about cost behavior

Costs that change abruptly at intervals of activity because the resources and their costs are only available in indivisible chunks

It may be difficult to trace cost to products and services if the costs are:

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