Question 1

Straight-line depreciation is a typical example of a:

Accepted Answer

A)  variable cost. 
B)  step-variable cost. 
C)  fixed cost. 
D)  mixed cost. 
E)  curvilinear cost. 
A)  variable cost. 
B)  step-variable cost. 
C)  fixed cost. 
D)  mixed cost. 
E)  curvilinear cost.

Question 2

Mohammed Products has determined that the number of machine hours worked (MH) drives the amount of manufacturing overhead incurred (MOH). On the basis of this relationship, a staff analyst has constructed the following regression equation:
MOH = 240,000 + 8MH
Which of the choices correctly depicts the nature of Mohammed's variables?

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E

Question 3

Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze costs.
Swanson's monthly fixed fee is:

Accepted Answer

A)  $80. 
B)  $102. 
C)  $106. 
D)  $112. 
E)  None of the other answers is correct. 
A)  $80. 
B)  $102. 
C)  $106. 
D)  $112. 
E)  None of the other answers is correct.

Question 4

The relevant range is that range of activity where a company achieves its maximum efficiency.

Accepted Answer

A) True 
 B)False

Question 5

The least-squares regression method of cost estimation relies on only two data points.

Accepted Answer

A) True 
 B)False

Question 6

Wel-care Corporation operates a small medical lab in Nebraska that conducts minor medical procedures (including blood tests and x-rays) for a number of doctors. The lab consumes various medical supplies and is staffed by two technicians, both of whom are paid a monthly salary. In addition, there is an on-site office manager who is also paid by the month.
Required:
A. If the lab's patient count increases by 15%, will the lab's total operating costs increase by 15%? Explain.
B. Wel-care is considering opening an additional lab in a new suburban medical building. What will likely happen to the lab's level of fixed cost incurrence? Why?
C. What analysis methods would be available to the office manager and/or Wel-care management if a close look at the lab's cost behavior is desired?

Accepted Answer

A. No. The lab has a mixture of both var

Question 7

Both the visual-fit and high-low methods of cost estimation have inherent limitations. Briefly identify the major deficiency associated with each method.

Accepted Answer

The visual-fit method suffers from a lac

Question 8

Each of Davisson's production managers (annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth. Davisson's salary cost can best be described as a:

Accepted Answer

A)  variable cost. 
B)  semivariable cost. 
C)  step-variable cost. 
D)  fixed cost. 
E)  step-fixed cost. 
A)  variable cost. 
B)  semivariable cost. 
C)  step-variable cost. 
D)  fixed cost. 
E)  step-fixed cost.

Question 9

Costs that result from a company's ownership or use of facilities and its basic organizational structure are known as:

Accepted Answer

A)  discretionary fixed costs. 
B)  committed fixed costs. 
C)  discretionary variable costs. 
D)  committed variable costs. 
E)  engineered costs. 
A)  discretionary fixed costs. 
B)  committed fixed costs. 
C)  discretionary variable costs. 
D)  committed variable costs. 
E)  engineered costs.

Question 10

Distinguish between least-squares regression and multiple regression as cost estimation methods.

Accepted Answer

In the least-squares regression (LSR) me

Question 11

Lewisa Company needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows. $\begin{array}{llr}& \text { Machine } \
& \text { Hours } & \text { Utilities } \
\text { Month } & \text { Worked } & \text { Cost }\
\text { April } & 4,500 & \$ 9,560 \
\text { May } & 4,200 & 9,440 \
\text { June } & 6,500 & 10,725 \
\text { July } & 7,000 & 11,400
\end{array}$ 
Lewisa anticipates producing 5,000 units in August, each unit requiring 1.5 hours of machine time. The company uses the high-low method to analyze costs.
Required: 
A. Calculate the variable and fixed components of the utilities cost.
B. Using the data calculated above, estimate the utilities cost for August.
C. Compare the high-low method versus the visual-fit method with respect to (1) number of data observations used in the analysis and (2) objectivity of the results.

Accepted Answer

A. Variable cost:
($11,400 - $9,440) ÷ (

Question 12

Yang Manufacturing, which uses the high-low method, makes a product called Yin. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below. $\begin{array}{lcccc} 
& \text { Type A } & \text { Type B } & \text { Type C } & \text { Total } \
5,000 \text { units } & \$ 4 & \$ 9 & \$ 4 & \$ 17 \
7,500 \text { units } & \$ 4 & \$ 6 & \$ 3 & \$ 13
\end{array}$ If Yang produces 10,000 units, the total cost would be:

Accepted Answer

A)  $90,000. 
B)  $100,000. 
C)  $110,000. 
D)  $125,000. 
E)  None of the other answers is correct. 
A)  $90,000. 
B)  $100,000. 
C)  $110,000. 
D)  $125,000. 
E)  None of the other answers is correct.

Question 13

A cost that has both a fixed and variable component is known as a:

Accepted Answer

A)  step-fixed cost. 
B)  step-variable cost. 
C)  semivariable cost. 
D)  curvilinear cost. 
E)  discretionary cost. 
A)  step-fixed cost. 
B)  step-variable cost. 
C)  semivariable cost. 
D)  curvilinear cost. 
E)  discretionary cost.

Question 14

Package Express, Inc. operates a small package delivery service in the Jacksonville suburbs. If the company uses a regression equation to forecast total operating costs, the coefficient of the equation's independent variable would correspond to the:

Accepted Answer

A)  variable operating cost per delivery. 
B)  fixed operating costs. 
C)  number of deliveries. 
D)  total variable operating costs. 
E)  total operating costs. 
A)  variable operating cost per delivery. 
B)  fixed operating costs. 
C)  number of deliveries. 
D)  total variable operating costs. 
E)  total operating costs.

Question 15

When graphed, a typical variable cost appears as:

Accepted Answer

A)  a horizontal line. 
B)  a vertical line. 
C)  a u-shaped line. 
D)  a diagonal line that slopes downward to the right. 
E)  a diagonal line that slopes upward to the right. 
A)  a horizontal line. 
B)  a vertical line. 
C)  a u-shaped line. 
D)  a diagonal line that slopes downward to the right. 
E)  a diagonal line that slopes upward to the right.

Question 16

The relationship between cost and activity is known as:

Accepted Answer

A)  cost estimation. 
B)  cost prediction. 
C)  cost behavior. 
D)  cost analysis. 
E)  cost approximation. 
A)  cost estimation. 
B)  cost prediction. 
C)  cost behavior. 
D)  cost analysis. 
E)  cost approximation.

Question 17

The following data relate to the Lisle Company for May and August of the current year: $\begin{array}{lrr} 
& \text { May } & \text { August } \
\text { Maintenance hours } & 25,000 & 29,000 \
\text { Maintenance cost } & \$ 1,175,000 & \$ 1,247,000
\end{array}$ May and August were the lowest and highest activity levels, and Lisle uses the high-low method to analyze cost behavior. Which of the following statements is true?

Accepted Answer

A)  The variable maintenance cost is $18 per hour. 
B)  The variable maintenance cost is $22 per hour. 
C)  The variable maintenance cost is $24 per hour. 
D)  The fixed maintenance cost is $72,000 per month. 
E)  More than one of the other answers is true. 
A)  The variable maintenance cost is $18 per hour. 
B)  The variable maintenance cost is $22 per hour. 
C)  The variable maintenance cost is $24 per hour. 
D)  The fixed maintenance cost is $72,000 per month. 
E)  More than one of the other answers is true.

Question 18

Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze costs.
Swanson's variable cost per copy is:

Accepted Answer

A)  $0.040. 
B)  $0.051. 
C)  $0.053. 
D)  $0.056. 
E)  None of the other answers is correct. 
A)  $0.040. 
B)  $0.051. 
C)  $0.053. 
D)  $0.056. 
E)  None of the other answers is correct.

Question 19

A mixed cost is also known as a:

Accepted Answer

A)  semivariable cost. 
B)  step-fixed cost. 
C)  variable cost. 
D)  curvilinear cost. 
E)  discretionary cost. 
A)  semivariable cost. 
B)  step-fixed cost. 
C)  variable cost. 
D)  curvilinear cost. 
E)  discretionary cost.

Question 20

Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are known as:

Accepted Answer

A)  step-fixed costs. 
B)  step-variable costs. 
C)  semivariable costs. 
D)  curvilinear costs. 
E)  mixed costs. 
A)  step-fixed costs. 
B)  step-variable costs. 
C)  semivariable costs. 
D)  curvilinear costs. 
E)  mixed costs.

Straight-line depreciation is a typical example of a:

The relevant range is that range of activity where a company achieves its maximum efficiency.

The least-squares regression method of cost estimation relies on only two data points.

Both the visual-fit and high-low methods of cost estimation have inherent limitations. Briefly identify the major deficiency associated with each method.

Costs that result from a company's ownership or use of facilities and its basic organizational structure are known as:

Distinguish between least-squares regression and multiple regression as cost estimation methods.

A cost that has both a fixed and variable component is known as a:

Package Express, Inc. operates a small package delivery service in the Jacksonville suburbs. If the company uses a regression equation to forecast total operating costs, the coefficient of the equation's independent variable would correspond to the:

When graphed, a typical variable cost appears as:

The relationship between cost and activity is known as:

A mixed cost is also known as a:

Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are known as:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 6: Activity Analysis, Cost Behavior, and Cost Estimation

Straight-line depreciation is a typical example of a:

The relevant range is that range of activity where a company achieves its maximum efficiency.

The least-squares regression method of cost estimation relies on only two data points.

Both the visual-fit and high-low methods of cost estimation have inherent limitations. Briefly identify the major deficiency associated with each method.

Costs that result from a company's ownership or use of facilities and its basic organizational structure are known as:

Distinguish between least-squares regression and multiple regression as cost estimation methods.

A cost that has both a fixed and variable component is known as a:

Package Express, Inc. operates a small package delivery service in the Jacksonville suburbs. If the company uses a regression equation to forecast total operating costs, the coefficient of the equation's independent variable would correspond to the:

When graphed, a typical variable cost appears as:

The relationship between cost and activity is known as:

A mixed cost is also known as a:

Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are known as:

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters