Question 1

Discretionary costs reflect

Accepted Answer

A)  The costs that managers incur to purchase new production machines when the old machines need replacing 
B)  Decisions about the maximum amount that will be spent next period for activities such as travel and marketing 
C)  Decisions about the amount of variable costs that will be incurred next period 
D)  The costs that managers incur to pay overtime when production levels are high 
A)  The costs that managers incur to purchase new production machines when the old machines need replacing 
B)  Decisions about the maximum amount that will be spent next period for activities such as travel and marketing 
C)  Decisions about the amount of variable costs that will be incurred next period 
D)  The costs that managers incur to pay overtime when production levels are high

Question 2

Which of the following is the most valid criticism of the high-low method?

Accepted Answer

A)  It never produces accurate results 
B)  It is mathematically too complex for most managers to comprehend 
C)  It is a specialised case of the two-point method 
D)  Data points might be outside the normal range of activity 
A)  It never produces accurate results 
B)  It is mathematically too complex for most managers to comprehend 
C)  It is a specialised case of the two-point method 
D)  Data points might be outside the normal range of activity

Question 3

Janice's Kennel and Pet Spa is located in Sydney. The company employs three pet attendants, four pet groomers and two front office staff who book appointments and keep records. The spa provides a range of services for dogs and cats including boarding, grooming, and obedience training. The grooming area includes a small retail section that carries dog and cat food, pet supplies, and toys. Which of the following is the best example of a discretionary cost for Janice's Kennel and Pet Spa?

Accepted Answer

A)  Pet food 
B)  Facility rent 
C)  Wages of pet groomers 
D)  Professional travel for Janice 
A)  Pet food 
B)  Facility rent 
C)  Wages of pet groomers 
D)  Professional travel for Janice

Question 4

Janice's Kennel and Pet Spa is located in Sydney. The company employs three pet attendants, four pet groomers and two front office staff who book appointments and keep records. The spa provides a range of services for dogs and cats including boarding, grooming, and obedience training. The grooming area includes a small retail section that carries dog and cat food, pet supplies, and toys. If the cost object is the total cost of the grooming product line, which of the following is an indirect cost?

Accepted Answer

A)  Front office staff salaries 
B)  Labor cost of employees who groom pets 
C)  Cost of grooming supplies 
D)  Depreciation on grooming tables 
A)  Front office staff salaries 
B)  Labor cost of employees who groom pets 
C)  Cost of grooming supplies 
D)  Depreciation on grooming tables

Question 5

The first step in estimating a cost function for relevant costs is to select a cost estimation technique.

Accepted Answer

A) True 
 B)False

Question 6

Mixed costs

Accepted Answer

A)  Consist of fixed and variable costs 
B)  Are constant in total 
C)  Consist of the variable portion of all costs 
D)  Have a constant per-unit value 
A)  Consist of fixed and variable costs 
B)  Are constant in total 
C)  Consist of the variable portion of all costs 
D)  Have a constant per-unit value

Question 7

Three different divisions of a toy manufacturing company are estimating costs for their human resources departments. Each division has a cost structure that is different from the other divisions' and those structures are represented by the following cost behavior patterns. Which cost is best described as fixed?

Accepted Answer

A)  Cost A 
B)  Cost B 
C)  Cost C 
D)  Cost B and Cost C 
A)  Cost A 
B)  Cost B 
C)  Cost C 
D)  Cost B and Cost C

Question 8

The high-low method frequently distorts a cost function because it uses too few data points to make an estimate.

Accepted Answer

A) True 
 B)False

Question 9

Cosby Company is attempting to develop the cost function for repair costs. The following past data are available:

Accepted Answer

A)  $0.15 
B)  $1.00 
C)  $4.00 
D)  $5.00 
A)  $0.15 
B)  $1.00 
C)  $4.00 
D)  $5.00

Question 10

After estimating a past cost function, managers I May need to update it for future changes.
II Have all of the information they need to predict future costs
III May or may not use it to estimate future costs.

Accepted Answer

A)  I only 
B)  II only 
C)  II and III only 
D)  I and III only 
A)  I only 
B)  II only 
C)  II and III only 
D)  I and III only

Question 11

Janice's Kennel and Pet Spa is located in Sydney. The company employs three pet attendants, four pet groomers and two front office staff who book appointments and keep records. The spa provides a range of services for dogs and cats including boarding, grooming, and obedience training. The grooming area includes a small retail section that carries dog and cat food, pet supplies, and toys. Assume Janice's Kennel and Pet Spa is currently boarding ten pets. The cost of food to board one more pet is best described as a

Accepted Answer

A)  Fixed cost 
B)  Marginal cost 
C)  Sunk cost 
D)  Mixed cost 
A)  Fixed cost 
B)  Marginal cost 
C)  Sunk cost 
D)  Mixed cost

Question 12

Fixed costs per unit

Accepted Answer

A)  Vary inversely with changes in volume 
B)  Change regardless of changes in volume 
C)  Will not change over the relevant range 
D)  Increase with an increase in volume 
A)  Vary inversely with changes in volume 
B)  Change regardless of changes in volume 
C)  Will not change over the relevant range 
D)  Increase with an increase in volume

Question 13

Mixed costs

Accepted Answer

A)  Vary with production in direct proportion to volume 
B)  Vary with production but not in direct proportion to volume 
C)  Do not vary with production 
D)  Include only different types of fixed costs 
A)  Vary with production in direct proportion to volume 
B)  Vary with production but not in direct proportion to volume 
C)  Do not vary with production 
D)  Include only different types of fixed costs

Question 14

The high-low method is a specific application of this method of cost estimation

Accepted Answer

A)  Two-point 
B)  Scatter plot 
C)  Engineered estimate of cost 
D)  Analysis at the account level 
A)  Two-point 
B)  Scatter plot 
C)  Engineered estimate of cost 
D)  Analysis at the account level

Question 15

The method for determining the cost function that does not rely on past costs is regression analysis.

Accepted Answer

A) True 
 B)False

Question 16

Simple regression analysis output produces a variety of statistics. Which of the following statistics best summarises how well the cost driver explains the behavior of the cost?

Accepted Answer

A)  T-statistics for alpha and beta coefficients 
B)  T-statistic and p-value for the alpha coefficient 
C)  P-values for alpha and beta coefficients 
D)  Adjusted R-square 
A)  T-statistics for alpha and beta coefficients 
B)  T-statistic and p-value for the alpha coefficient 
C)  P-values for alpha and beta coefficients 
D)  Adjusted R-square

Question 17

Three different divisions of a toy manufacturing company are estimating costs for their human resources departments. Each division has a cost structure that is different from the other divisions' and those structures are represented by the following cost behavior patterns. Which cost is best described as variable?

Accepted Answer

A)  Cost A 
B)  Cost B 
C)  Cost C 
D)  Cost A and Cost C 
A)  Cost A 
B)  Cost B 
C)  Cost C 
D)  Cost A and Cost C

Question 18

Cosby Company is attempting to develop the cost function for repair costs. The following past data are available:

Accepted Answer

A)  $5,785 
B)  $5,585 
C)  $5,685 
D)  $5,985 
A)  $5,785 
B)  $5,585 
C)  $5,685 
D)  $5,985

Question 19

A scatter plot provides helpful information about the relationship between a cost and a potential cost driver.

Accepted Answer

A) True 
 B)False

Question 20

Milano Company has an average overhead cost per hour of $10.50 at 3,500 machine hours, and at 3,000 hours it is $11.25. The company managers wish to estimate the overhead cost function. What is the fixed overhead cost?

Accepted Answer

A)  $15,750 
B)  $36,750 
C)  $21,000 
D)  $18,000 
A)  $15,750 
B)  $36,750 
C)  $21,000 
D)  $18,000

Discretionary costs reflect

Which of the following is the most valid criticism of the high-low method?

The first step in estimating a cost function for relevant costs is to select a cost estimation technique.

Mixed costs

The high-low method frequently distorts a cost function because it uses too few data points to make an estimate.

Cosby Company is attempting to develop the cost function for repair costs. The following past data are available:

After estimating a past cost function, managers I May need to update it for future changes. II Have all of the information they need to predict future costs III May or may not use it to estimate future costs.

Fixed costs per unit

Mixed costs

The high-low method is a specific application of this method of cost estimation

The method for determining the cost function that does not rely on past costs is regression analysis.

Simple regression analysis output produces a variety of statistics. Which of the following statistics best summarises how well the cost driver explains the behavior of the cost?

Cosby Company is attempting to develop the cost function for repair costs. The following past data are available:

A scatter plot provides helpful information about the relationship between a cost and a potential cost driver.

Milano Company has an average overhead cost per hour of $10.50 at 3,500 machine hours, and at 3,000 hours it is $11.25. The company managers wish to estimate the overhead cost function. What is the fixed overhead cost?

The Role of Accounting Information in Management Decision Making

A Costing Framework and Cost Allocation

Cost-Volume-Profit Cvp Analysis

Job Costing Systems

Process Costing Systems

Absorption, Variable and Throughput Costing

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters

Exam 2: Cost Concepts, Behaviour and Estimation

Discretionary costs reflect

Which of the following is the most valid criticism of the high-low method?

The first step in estimating a cost function for relevant costs is to select a cost estimation technique.

Mixed costs

The high-low method frequently distorts a cost function because it uses too few data points to make an estimate.

Cosby Company is attempting to develop the cost function for repair costs. The following past data are available:

After estimating a past cost function, managers I May need to update it for future changes. II Have all of the information they need to predict future costs III May or may not use it to estimate future costs.

Fixed costs per unit

Mixed costs

The high-low method is a specific application of this method of cost estimation

The method for determining the cost function that does not rely on past costs is regression analysis.

Simple regression analysis output produces a variety of statistics. Which of the following statistics best summarises how well the cost driver explains the behavior of the cost?

Cosby Company is attempting to develop the cost function for repair costs. The following past data are available:

A scatter plot provides helpful information about the relationship between a cost and a potential cost driver.

Milano Company has an average overhead cost per hour of $10.50 at 3,500 machine hours, and at 3,000 hours it is $11.25. The company managers wish to estimate the overhead cost function. What is the fixed overhead cost?

The Role of Accounting Information in Management Decision Making

A Costing Framework and Cost Allocation

Cost-Volume-Profit Cvp Analysis

Job Costing Systems

Process Costing Systems

Absorption, Variable and Throughput Costing

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters