Question 1

Step fixed-cost functions are variable over the long run.

Accepted Answer

A) True 
 B)False

Question 2

At the Spring Valley Company, the cost of the personnel department has always been charged to production departments based upon number of employees. Recently, opinions gathered from the department managers indicate that the number of new hires might be a better predictor of personnel costs.
Total personnel department costs are $298,000.
 
Which cost estimation method is being used by Spring Valley Company?

Accepted Answer

A)  the simple regression method 
B)  the conference method 
C)  the account analysis method 
D)  the marginal costing method 
A)  the simple regression method 
B)  the conference method 
C)  the account analysis method 
D)  the marginal costing method

Question 3

Which of the following functions represents the least total cost assuming the number of units is equal in each case?

Accepted Answer

A)  y = 180 + 9X 
B)  y = 90 + 5X 
C)  y = 90 + 9X 
D)  y = 180 + 5X 
A)  y = 180 + 9X 
B)  y = 90 + 5X 
C)  y = 90 + 9X 
D)  y = 180 + 5X

Question 4

Why is choosing the correct cost driver to estimate indirect manufacturing costs important?

Accepted Answer

A)  Identifying the wrong driver can lead management to incorrect and costly decisions 
B)  Identifying the wrong driver can increase actual overhead costs 
C)  Identifying the wrong driver can increase the usage of the correct driver 
D)  Identifying the wrong driver can increase the direct costs of the cost object 
A)  Identifying the wrong driver can lead management to incorrect and costly decisions 
B)  Identifying the wrong driver can increase actual overhead costs 
C)  Identifying the wrong driver can increase the usage of the correct driver 
D)  Identifying the wrong driver can increase the direct costs of the cost object

Question 5

Put the following steps in order for using the high-low method of estimating a cost function:
A = Identify the cost function
B = Calculate the constant
C = Calculate the slope coefficient
D = Identify the highest and lowest observed values

Accepted Answer

A)  D C A B 
B)  C D A B 
C)  A D C B 
D)  D C B A 
A)  D C A B 
B)  C D A B 
C)  A D C B 
D)  D C B A

Question 6

Which cost estimation method uses a formal statistical method such as regression analysis to develop cost functions based on past data?

Accepted Answer

A)  the cash accounting method 
B)  the conference method 
C)  the accrual accounting method 
D)  the quantitative analysis method 
A)  the cash accounting method 
B)  the conference method 
C)  the accrual accounting method 
D)  the quantitative analysis method

Question 7

South Coast Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations.
 
What were the total fixed costs for 2017?

Accepted Answer

A)  $1,531,320 
B)  $366,520 
C)  $335,000 
D)  $1,164,800 
A)  $1,531,320 
B)  $366,520 
C)  $335,000 
D)  $1,164,800

Question 8

For Heavy Manufacturing Company, labor-hours are 40,000 and wages $144,000 at the high point of the relevant range, and labor-hours are 24,000 and wages $96,000 at the low point of the relevant range.
What is the slope coefficient?

Accepted Answer

A)  $3.75 
B)  $3.00 
C)  $3.60 
D)  $4.00 
A)  $3.75 
B)  $3.00 
C)  $3.60 
D)  $4.00

Question 9

In using high-low method, the slope coefficient is calculated by dividing the difference between highest and lowest observations of the cost driver by the difference between costs associated with highest and lowest observations of the cost driver.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following best describes a step variable-cost function?

Accepted Answer

A)  a step cost function in which cost remains the same over narrow ranges of the level of activity in each relevant range 
B)  a step cost function in which cost remains the same over narrow ranges of the level of activity outside the relevant range 
C)  step cost function where the cost remains the same over wide ranges of the activity in each relevant range 
D)  step cost function where the cost remains the same over wide ranges of the activity outside the relevant range 
A)  a step cost function in which cost remains the same over narrow ranges of the level of activity in each relevant range 
B)  a step cost function in which cost remains the same over narrow ranges of the level of activity outside the relevant range 
C)  step cost function where the cost remains the same over wide ranges of the activity in each relevant range 
D)  step cost function where the cost remains the same over wide ranges of the activity outside the relevant range

Question 11

It can be inferred that when there is a high correlation between two variables, one is the cause of the other.

Accepted Answer

A) True 
 B)False

Question 12

A step variable-cost function ________.

Accepted Answer

A)  is fixed over the long run but not over the short run 
B)  is often approximated with a continuous variable-cost function 
C)  remains the same over a wide range of activity 
D)  example includes adding additional warehouse space 
A)  is fixed over the long run but not over the short run 
B)  is often approximated with a continuous variable-cost function 
C)  remains the same over a wide range of activity 
D)  example includes adding additional warehouse space

Question 13

The cost function y = 13,000 + 9X ________.

Accepted Answer

A)  represents a mixed cost 
B)  will intersect the y-axis at 9 
C)  has a slope coefficient of 13,000 
D)  is a curved line 
A)  represents a mixed cost 
B)  will intersect the y-axis at 9 
C)  has a slope coefficient of 13,000 
D)  is a curved line

Question 14

Fixed costs are sometimes allocated to individual products as part of the standard costing system. When this is the case, they should be treated as variable costs for purposes of future cost estimation.

Accepted Answer

A) True 
 B)False

Question 15

The coefficient of determination (r²) measures the percentage of variation in X (the independent variable) explained by Y (the dependent variable).

Accepted Answer

A) True 
 B)False

Question 16

Outside of the relevant range, variable and fixed cost-behavior patterns change, causing costs to become nonlinear.

Accepted Answer

A) True 
 B)False

Question 17

The learning-curve models presented in the text examine ________.

Accepted Answer

A)  how quality increases over time 
B)  how efficiency increases as more units are produced 
C)  how setup costs decline as more workers are added 
D)  the change in variable costs when quantity discounts are available 
A)  how quality increases over time 
B)  how efficiency increases as more units are produced 
C)  how setup costs decline as more workers are added 
D)  the change in variable costs when quantity discounts are available

Question 18

The dependent variable is a cost to be predicted and managed, whereas an independent variable or cost driver is the factor used to predict the dependent variable.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an equation of a fixed cost function?

Accepted Answer

A)  y = (a + b)X 
B)  y = a + bX 
C)  y = bX 
D)  y = a 
A)  y = (a + b)X 
B)  y = a + bX 
C)  y = bX 
D)  y = a

Question 20

With a step fixed-cost function ________.

Accepted Answer

A)  the cost varies with the changes in the activity 
B)  fixed cost is often approximated with a continuous variable-cost function 
C)  fixed cost changes proportionally with the level of activity 
D)  the cost remains the same over wide ranges of the activity in each relevant range 
A)  the cost varies with the changes in the activity 
B)  fixed cost is often approximated with a continuous variable-cost function 
C)  fixed cost changes proportionally with the level of activity 
D)  the cost remains the same over wide ranges of the activity in each relevant range

Exam 10: Determining How Costs Behave

Step fixed-cost functions are variable over the long run.

Which of the following functions represents the least total cost assuming the number of units is equal in each case?

Why is choosing the correct cost driver to estimate indirect manufacturing costs important?

Put the following steps in order for using the high-low method of estimating a cost function: A = Identify the cost function B = Calculate the constant C = Calculate the slope coefficient D = Identify the highest and lowest observed values

Which cost estimation method uses a formal statistical method such as regression analysis to develop cost functions based on past data?

South Coast Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. What were the total fixed costs for 2017?

For Heavy Manufacturing Company, labor-hours are 40,000 and wages $144,000 at the high point of the relevant range, and labor-hours are 24,000 and wages $96,000 at the low point of the relevant range. What is the slope coefficient?

In using high-low method, the slope coefficient is calculated by dividing the difference between highest and lowest observations of the cost driver by the difference between costs associated with highest and lowest observations of the cost driver.

Which of the following best describes a step variable-cost function?

It can be inferred that when there is a high correlation between two variables, one is the cause of the other.

A step variable-cost function ________.

The cost function y = 13,000 + 9X ________.

Fixed costs are sometimes allocated to individual products as part of the standard costing system. When this is the case, they should be treated as variable costs for purposes of future cost estimation.

The coefficient of determination (r²) measures the percentage of variation in X (the independent variable) explained by Y (the dependent variable).

Outside of the relevant range, variable and fixed cost-behavior patterns change, causing costs to become nonlinear.

The learning-curve models presented in the text examine ________.

The dependent variable is a cost to be predicted and managed, whereas an independent variable or cost driver is the factor used to predict the dependent variable.

Which of the following is an equation of a fixed cost function?

With a step fixed-cost function ________.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

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