Exam 8: Determining How Costs Behave

The managerial accountant at Hampson Company reported the following information: Use the high-low method to and use the highest observation of the cost driver to compute the constant a,using a slope coefficient of $13.92 per machine hour. A = y - BX At the highest observation of the cost driver,the constant,a,is:

In a step variable-cost function,the cost remains the same over various ranges of the level of activity in each relevant range.

The cost function y = $10,000:

Supplementing the account analysis method with the conference method reduces credibility.

The accounting manager at the Globe Factory reported telephone charges of $2,500 per month plus $1.50 per minute.Write a linear cost function equation to represent the cost.

The vertical axis is called the ________.

Which of the following analyses estimates the relationship between the dependent variable and two or more independent variables?

Which of the following is the statistical method used by managers to measure the average amount of change in the dependent variable associated with a unit change in one or more independent variables?

Which of the following estimation methods estimates cost functions by analyzing the relationship between inputs and outputs in physical terms?

Many organizations use the industrial engineering method to estimate direct manufacturing costs but find it too costly or impractical for analyzing their entire cost structure.

To avoid the problem of allocating fixed costs as if they are variable costs,the management accountant should carefully distinguish fixed costs from variable costs and they should never treat the fixed cost per unit as a variable cost.

Cost behavior is not approximated by a linear cost function within the relevant range.

The longer the time horizon,all other things being equal,the more likely that the cost will be variable.

The horizontal axis is called the ________.

In which step of the decision process do managers compare predicted costs to determine the accuracy of predictions?

The managerial accountant at the Candle Shoppe uses the high-low method to estimate its cost function.The managerial accountant reported the following information in 2012: Required: Compute the slope coefficient per machine-hour.

The method that relies on analyzing physical relationships between cost drivers and costs is ________.

In which step of estimating a cost function using quantitative analysis would a manager realize all items of costs in the dependent variable have different cost drivers?

In which step of the decision process do managers use past data to estimate the relationship of cost drivers compared to costs?

A mathematical description of how a cost changes with changes in the level of an activity relating to that cost is a ________.