Question 1

Which of the following is a true statement relating to step costs?

Accepted Answer

A) Step costs remain constant over only a small range of activity. 
B) Step costs do not contain a fixed component. 
C) Step costs are also referred to as fixed costs. 
D) Step costs do not vary proportionately over a small range of activity. 
A) Step costs remain constant over only a small range of activity. 
B) Step costs do not contain a fixed component. 
C) Step costs are also referred to as fixed costs. 
D) Step costs do not vary proportionately over a small range of activity.

Question 2

When production and sales are equal, a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

Accepted Answer

A) True 
 B)False

Question 3

A discretionary fixed cost

Accepted Answer

A) remains the same per unit regardless of the level of activity. 
B) increases as the level of activity increases. 
C) can be changed in the short run. 
D) can be changed over the long run. 
A) remains the same per unit regardless of the level of activity. 
B) increases as the level of activity increases. 
C) can be changed in the short run. 
D) can be changed over the long run.

Question 4

Georgiana operates a nail salon.She is trying to plan her costs for the next month and is uncertain of how to estimate those costs.Help her estimate next month's costs given the following information she collected, based on number of customers per month.   If Georgiana estimates 1,400 customers next month, what is the estimated cost for nail supplies?

Accepted Answer

A) $4,030 
B) $4,340 
C) $4,650 
D) $3,720 
A) $4,030 
B) $4,340 
C) $4,650 
D) $3,720

Question 5

With a fixed cost, the cost per unit varies proportionately with changes in the level of activity.

Accepted Answer

A) True 
 B)False

Question 6

Dana owns her own real estate agency.She has been working hard to increase her client base.She offers the most comprehensive advertising campaign in the city and it has been paying off by the steady increase in the number of listings over the last several months.However, Dana is concerned that her extensive cost for advertising is eating into her profits.It is difficult to determine how much she spends on advertising for each listing because some of her advertising sources are fixed amounts each month and others are more variable in nature.She would like to analyze the following information to determine how her advertising costs behave based on the number of listings.   Using the high-low method, what is Dana's variable cost per listing for advertising?

Accepted Answer

A) $610 
B) $593 
C) $612 
D) $598 
A) $610 
B) $593 
C) $612 
D) $598

Question 7

Data concerning Engel Company's activity for the first three months are shown below.   Using the high-low method of analysis, determine the estimated variable cost per machine hour and the total fixed cost.

Accepted Answer

($3,500 ̶ $2,900) ÷ (4,800 - 3

Question 8

When managers talk about cost behavior, they are referring to

Accepted Answer

A) where a cost is reported on the income statement. 
B) the way in which total costs change in response to changes in the level of activity. 
C) the method used to determine whether a cost is accrued or expensed. 
D) the way cost is reported within inventory on the balance sheet. 
A) where a cost is reported on the income statement. 
B) the way in which total costs change in response to changes in the level of activity. 
C) the method used to determine whether a cost is accrued or expensed. 
D) the way cost is reported within inventory on the balance sheet.

Question 9

A 10 percent increase in sales volume will result in a

Accepted Answer

A) 10 percent decrease in total variable cost. 
B) 10 percent decrease in unit variable cost. 
C) 10 percent increase in total variable cost. 
D) 10 percent increase in unit variable cost. 
A) 10 percent decrease in total variable cost. 
B) 10 percent decrease in unit variable cost. 
C) 10 percent increase in total variable cost. 
D) 10 percent increase in unit variable cost.

Question 10

A scattergraph is a simple graph that shows

Accepted Answer

A) total costs in relation to volume. 
B) the fixed portion of a total cost. 
C) the variable portion of a total cost. 
D) the point where revenue equals total costs. 
A) total costs in relation to volume. 
B) the fixed portion of a total cost. 
C) the variable portion of a total cost. 
D) the point where revenue equals total costs.

Question 11

If the activity level increases, what happens to the total variable cost?

Accepted Answer

A) It remains the same. 
B) It decreases. 
C) It increases. 
D) It depends on how much the activity level increases. 
A) It remains the same. 
B) It decreases. 
C) It increases. 
D) It depends on how much the activity level increases.

Question 12

Cost behaviors and estimates are valid only within the normal level of operating activity.This range is referred to as the

Accepted Answer

A) normal range. 
B) activity range. 
C) relevant range. 
D) cost range. 
A) normal range. 
B) activity range. 
C) relevant range. 
D) cost range.

Question 13

Assume you are planning a spring break ski trip to Colorado.You are preparing a budget of your costs.You are staying at a lodge that has a special where the lodge charges you $80 per week for the ski lift regardless of how many times you ride.You believe you will ride the ski lift 40 times during the week.The ski lift cost is an example of a

Accepted Answer

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

Question 14

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Accepted Answer

A) True 
 B)False

Question 15

Regression is a more precise method of estimating the fixed and variable components of a mixed cost than the high-low method or a scattergraph.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is the simplest method for estimating the fixed and variable components of a mixed cost?

Accepted Answer

A) Regression analysis 
B) Scattergraphs 
C) The high-low method 
D) Break-even analysis 
A) Regression analysis 
B) Scattergraphs 
C) The high-low method 
D) Break-even analysis

Question 17

To estimate the unit variable cost using the high-low method, identify the highest and lowest level of activity and compute the slope of the line.

Accepted Answer

A) True 
 B)False

Question 18

There is an important relationship between contribution margin and profit.Which of the following statements is not true?

Accepted Answer

A) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same. 
B) As the number of units sold rises, profit increases by the additional contribution margin per unit. 
C) As the number of units sold increases, total contribution margin and fixed costs increase. 
D) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same. 
A) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same. 
B) As the number of units sold rises, profit increases by the additional contribution margin per unit. 
C) As the number of units sold increases, total contribution margin and fixed costs increase. 
D) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.

Question 19

Stegman, Ltd., provides nationwide passenger train service on 21,000 miles of routes.Selected operating data for fiscal 2021 are shown below.   Required: 
a.The above data provide three possible activity measures that could influence fuel expense.Use the high-low method to develop a cost formula for fuel expense for each of the three measures.
b.Do any of the cost formulas you developed in (a) appear to be a poor choice for estimating future train operations expense? Why?
c.Which formula do you think will make the most accurate predictions? Why?

Accepted Answer

a.Passengers:
Variable cost = ($25,459 −

Question 20

There is an important relation between contribution margin and profit.Which of the following statements is not true?

Accepted Answer

A) As the number of units sold rises, profit increases by the variable cost per unit. 
B) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same. 
C) As the number of units sold rises, profit increases by the additional contribution margin per unit. 
D) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same. 
A) As the number of units sold rises, profit increases by the variable cost per unit. 
B) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same. 
C) As the number of units sold rises, profit increases by the additional contribution margin per unit. 
D) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.

Which of the following is a true statement relating to step costs?

When production and sales are equal, a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

A discretionary fixed cost

With a fixed cost, the cost per unit varies proportionately with changes in the level of activity.

Data concerning Engel Company's activity for the first three months are shown below. Using the high-low method of analysis, determine the estimated variable cost per machine hour and the total fixed cost.

When managers talk about cost behavior, they are referring to

A 10 percent increase in sales volume will result in a

A scattergraph is a simple graph that shows

If the activity level increases, what happens to the total variable cost?

Cost behaviors and estimates are valid only within the normal level of operating activity.This range is referred to as the

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Regression is a more precise method of estimating the fixed and variable components of a mixed cost than the high-low method or a scattergraph.

Which of the following is the simplest method for estimating the fixed and variable components of a mixed cost?

To estimate the unit variable cost using the high-low method, identify the highest and lowest level of activity and compute the slope of the line.

There is an important relationship between contribution margin and profit.Which of the following statements is not true?

There is an important relation between contribution margin and profit.Which of the following statements is not true?

Accounting As a Tool for Management

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

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Exam 2: Cost Behavior and Cost Estimation

Which of the following is a true statement relating to step costs?

When production and sales are equal, a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

A discretionary fixed cost

With a fixed cost, the cost per unit varies proportionately with changes in the level of activity.

Data concerning Engel Company's activity for the first three months are shown below. Using the high-low method of analysis, determine the estimated variable cost per machine hour and the total fixed cost.

When managers talk about cost behavior, they are referring to

A 10 percent increase in sales volume will result in a

A scattergraph is a simple graph that shows

If the activity level increases, what happens to the total variable cost?

Cost behaviors and estimates are valid only within the normal level of operating activity.This range is referred to as the

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Regression is a more precise method of estimating the fixed and variable components of a mixed cost than the high-low method or a scattergraph.

Which of the following is the simplest method for estimating the fixed and variable components of a mixed cost?

To estimate the unit variable cost using the high-low method, identify the highest and lowest level of activity and compute the slope of the line.

There is an important relationship between contribution margin and profit.Which of the following statements is not true?

There is an important relation between contribution margin and profit.Which of the following statements is not true?

Accounting As a Tool for Management

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Filters