Question 1

Committed fixed costs usually arise from the possession of facilities,equipment and a basic organizational structure.

Accepted Answer

A) True 
 B)False

Question 2

Many organizations use a linear relationship with a single cost driver to describe a cost even though the cost may have multiple cost drivers.Why?

Accepted Answer

A) This approach is easier and less expensive. 
B) The cost of developing a more complex function is greater than the benefit. 
C) Cost estimates from the simple function are accurate enough for most decisions. 
D) All of the above 
A) This approach is easier and less expensive. 
B) The cost of developing a more complex function is greater than the benefit. 
C) Cost estimates from the simple function are accurate enough for most decisions. 
D) All of the above

Question 3

The cost of the Maintenance Department at Forest Manufacturing has always been charged to the production departments based on the number of employees.Recently,an activity analysis of possible cost drivers was performed which indicated that the square feet of space may also be a predictor of costs to be assigned to each production department.The Maintenance Department cost is $1,000,000.The following data is available:
   Required:
Determine the amount of the maintenance department cost that should be allocated to Department X if the cost driver used is: (A)number of employees and (B)square feet of space.

Accepted Answer

A)300/600 x $1,000,0

Question 4

The high-low method uses estimated cost data to approximate the cost function.

Accepted Answer

A) True 
 B)False

Question 5

The Ford Company used regression analysis to predict the annual cost of utilities.The results were as follows:   The linear cost function is ________ where Y = Total utilities cost and X = Number of direct labor hours.

Accepted Answer

A) Y = $2,500 + $2.037X 
B) Y = $2.037 + $2,500X 
C) Y = $595 + $0.865X 
D) Y = $2,500 + $0.865X 
A) Y = $2,500 + $2.037X 
B) Y = $2.037 + $2,500X 
C) Y = $595 + $0.865X 
D) Y = $2,500 + $0.865X

Question 6

Palmer Inc.currently produces 110,000 units at a cost of $440,000.The cost is variable.Next year Palmer Inc.expects to produce 115,000 units.Palmer's relevant range for production is 100,000 to 120,000 units.If 115,000 units are produced next year,what is the expected variable cost?

Accepted Answer

A) $420,000 
B) $430,000 
C) $440,000 
D) $460,000 
A) $420,000 
B) $430,000 
C) $440,000 
D) $460,000

Question 7

Nonin Company used regression analysis to predict the annual cost of indirect materials.The results were as follows:   The variable cost per unit of product is ________.

Accepted Answer

A) $2.1876 
B) $11.75 
C) $9,960 
D) $14,885 
A) $2.1876 
B) $11.75 
C) $9,960 
D) $14,885

Question 8

In an economic recession,a company could NOT eliminate ________.

Accepted Answer

A) employee training program 
B) research and development projects 
C) salaries of maintenance workers 
D) depreciation of factory machines 
A) employee training program 
B) research and development projects 
C) salaries of maintenance workers 
D) depreciation of factory machines

Question 9

Which is NOT a step cost?

Accepted Answer

A) When oil and gas exploration activity reaches a certain level in a given area,a company leases an additional rig.The lease cost of the rigs is a step cost. 
B) When ten nurses are added to a shift,a nursing supervisor is also added to the shift.The salaries of the nursing supervisors are a step cost. 
C) When a telemarketing company adds ten workers to a shift,a supervisor is also added to the shift.The salaries of the supervisors are a step cost. 
D) When a manufacturing company ceases production,a skeleton crew of maintenance workers continues to work,but the rest are terminated.When production resumes,maintenance workers are rehired in direct proportion to the amount of production.The wages of the maintenance workers are a step cost. 
A) When oil and gas exploration activity reaches a certain level in a given area,a company leases an additional rig.The lease cost of the rigs is a step cost. 
B) When ten nurses are added to a shift,a nursing supervisor is also added to the shift.The salaries of the nursing supervisors are a step cost. 
C) When a telemarketing company adds ten workers to a shift,a supervisor is also added to the shift.The salaries of the supervisors are a step cost. 
D) When a manufacturing company ceases production,a skeleton crew of maintenance workers continues to work,but the rest are terminated.When production resumes,maintenance workers are rehired in direct proportion to the amount of production.The wages of the maintenance workers are a step cost.

Question 10

Presented below is the production data for six months showing the mixed costs incurred by Andrew Company.   Andrew Company uses the high-low method to analyze mixed costs.The cost function is ________ where Y= Total Cost and X= Number of units.

Accepted Answer

A) Y = $440 + $1.12X 
B) Y = $3,562 + $0.144X 
C) Y = $107 + $1.416X 
D) Y = $7,850 + $0.132X 
A) Y = $440 + $1.12X 
B) Y = $3,562 + $0.144X 
C) Y = $107 + $1.416X 
D) Y = $7,850 + $0.132X

Question 11

The account analysis method of measuring cost behavior does not rely on subjective assessments.

Accepted Answer

A) True 
 B)False

Question 12

Managers cannot eliminate discretionary fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

Managers should apply plausibility and reliability to obtain accurate and useful cost functions.

Accepted Answer

A) True 
 B)False

Question 14

SK Company makes metal signs for businesses and residences.These signs are made of sheet metal,which the owner paints by hand.The owner is concerned that he does not have a good measure of support costs for the signs.Currently,he predicts support costs to be 30 percent 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 measure.SK Company has the following information available:   Using cost of materials as the cost driver,what amount of support costs is assigned to the large sign?

Accepted Answer

A) $50 
B) $80 
C) $90 
D) $210 
A) $50 
B) $80 
C) $90 
D) $210

Question 15

The EEE Company has obtained the following data:
   Required: 
A)Using the high-low method,determine the cost function for the above data.Round to two decimal places.
B)If direct labor hours equal 10,000,what are the total expected indirect production costs?

Accepted Answer

A) (109,794 - 81,802)/(6,000 - 3,700)= 1

Question 16

The following data has been assembled for Cub Company.Use the high-low method.   The expected total cost at an operating level of 2,850 hours is ________.

Accepted Answer

A) $25,692 
B) $32,016 
C) $33,240 
D) $34,736 
A) $25,692 
B) $32,016 
C) $33,240 
D) $34,736

Question 17

In relation to a cost function,the term reliability means ________.

Accepted Answer

A) whether the costs and activities can be easily observed 
B) whether the cost function conforms to a given mathematical model 
C) how well the cost function predicts future costs 
D) how well the cost function explains past cost behavior 
A) whether the costs and activities can be easily observed 
B) whether the cost function conforms to a given mathematical model 
C) how well the cost function predicts future costs 
D) how well the cost function explains past cost behavior

Question 18

Managers apply two criteria to obtain accurate and useful cost functions.These criteria are ________.

Accepted Answer

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

Question 19

________ arise as a result of strategic decisions about the scale and scope of an organization's activities.

Accepted Answer

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

Question 20

Because of the grounding in ________ analysis,the regression cost measures for a cost function are more ________ than those obtained from other methods.

Accepted Answer

A) activity; reliable 
B) account; accurate 
C) statistical; reliable 
D) engineering; accurate 
A) activity; reliable 
B) account; accurate 
C) statistical; reliable 
D) engineering; accurate

Committed fixed costs usually arise from the possession of facilities,equipment and a basic organizational structure.

Many organizations use a linear relationship with a single cost driver to describe a cost even though the cost may have multiple cost drivers.Why?

The high-low method uses estimated cost data to approximate the cost function.

The Ford Company used regression analysis to predict the annual cost of utilities.The results were as follows: The linear cost function is ________ where Y = Total utilities cost and X = Number of direct labor hours.

Palmer Inc.currently produces 110,000 units at a cost of $440,000.The cost is variable.Next year Palmer Inc.expects to produce 115,000 units.Palmer's relevant range for production is 100,000 to 120,000 units.If 115,000 units are produced next year,what is the expected variable cost?

Nonin Company used regression analysis to predict the annual cost of indirect materials.The results were as follows: The variable cost per unit of product is ________.

In an economic recession,a company could NOT eliminate ________.

Which is NOT a step cost?

Presented below is the production data for six months showing the mixed costs incurred by Andrew Company. Andrew Company uses the high-low method to analyze mixed costs.The cost function is ________ where Y= Total Cost and X= Number of units.

The account analysis method of measuring cost behavior does not rely on subjective assessments.

Managers cannot eliminate discretionary fixed costs.

Managers should apply plausibility and reliability to obtain accurate and useful cost functions.

The EEE Company has obtained the following data: Required: A)Using the high-low method,determine the cost function for the above data.Round to two decimal places. B)If direct labor hours equal 10,000,what are the total expected indirect production costs?

The following data has been assembled for Cub Company.Use the high-low method. The expected total cost at an operating level of 2,850 hours is ________.

In relation to a cost function,the term reliability means ________.

Managers apply two criteria to obtain accurate and useful cost functions.These criteria are ________.

________ arise as a result of strategic decisions about the scale and scope of an organization's activities.

Because of the grounding in analysis,the regression cost measures for a cost function are more than those obtained from other methods.

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 3: Measurement of Cost Behavior

Committed fixed costs usually arise from the possession of facilities,equipment and a basic organizational structure.

Many organizations use a linear relationship with a single cost driver to describe a cost even though the cost may have multiple cost drivers.Why?

The high-low method uses estimated cost data to approximate the cost function.

The Ford Company used regression analysis to predict the annual cost of utilities.The results were as follows: The linear cost function is ________ where Y = Total utilities cost and X = Number of direct labor hours.

Palmer Inc.currently produces 110,000 units at a cost of $440,000.The cost is variable.Next year Palmer Inc.expects to produce 115,000 units.Palmer's relevant range for production is 100,000 to 120,000 units.If 115,000 units are produced next year,what is the expected variable cost?

Nonin Company used regression analysis to predict the annual cost of indirect materials.The results were as follows: The variable cost per unit of product is ________.

In an economic recession,a company could NOT eliminate ________.

Which is NOT a step cost?

Presented below is the production data for six months showing the mixed costs incurred by Andrew Company. Andrew Company uses the high-low method to analyze mixed costs.The cost function is ________ where Y= Total Cost and X= Number of units.

The account analysis method of measuring cost behavior does not rely on subjective assessments.

Managers cannot eliminate discretionary fixed costs.

Managers should apply plausibility and reliability to obtain accurate and useful cost functions.

The EEE Company has obtained the following data: Required: A)Using the high-low method,determine the cost function for the above data.Round to two decimal places. B)If direct labor hours equal 10,000,what are the total expected indirect production costs?

The following data has been assembled for Cub Company.Use the high-low method. The expected total cost at an operating level of 2,850 hours is ________.

In relation to a cost function,the term reliability means ________.

Managers apply two criteria to obtain accurate and useful cost functions.These criteria are ________.

________ arise as a result of strategic decisions about the scale and scope of an organization's activities.

Because of the grounding in ________ analysis,the regression cost measures for a cost function are more ________ than those obtained from other methods.

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Because of the grounding in analysis,the regression cost measures for a cost function are more than those obtained from other methods.