Question 1

Variable costs change in direct proportion to a change in the activity level.

Accepted Answer

A) True 
 B)False

Question 2

In regression analysis, the variable that is being predicted is known as the independent variable.

Accepted Answer

A) True 
 B)False

Question 3

What type of cost exhibits the behavior shown below? $$\begin{array}{l}
\text { Manufacturing }\
\begin{array} { c c } 
\text { Volume (Units) } & \text { Cost Per Unit } \
\hline 50,000 & \$ 1.95 \
70,000 & 1.95
\end{array}
\end{array}$$

Accepted Answer

A)  Variable cost. 
B)  Fixed cost. 
C)  Semivariable cost. 
D)  Discretionary fixed cost. 
E)  Step-fixed cost. 
A)  Variable cost. 
B)  Fixed cost. 
C)  Semivariable cost. 
D)  Discretionary fixed cost. 
E)  Step-fixed cost.

Question 4

Which of the following choices denotes the typical cost behavior of advertising and sales commissions?

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 5

Committed fixed costs would include:

Accepted Answer

A)  advertising. 
B)  research and development. 
C)  depreciation on buildings and equipment. 
D)  contributions to charitable organizations. 
E)  expenditures for direct labor. 
A)  advertising. 
B)  research and development. 
C)  depreciation on buildings and equipment. 
D)  contributions to charitable organizations. 
E)  expenditures for direct labor.

Question 6

Vincente Corporation has a machining capacity of 200,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:   
Vincente uses the high-low method to analyze cost behavior.
Required: 
A. Classify each of the costs as being either variable, fixed, or semivariable.
B. Calculate amounts for the two unknowns in the preceding table.
C.
C. Calculate the total amount that Viscount would expect at a 75% utilization rate for Cost A, Cost B, and Cost
D. Develop an equation that Vincente can use to predict total cost for any level of hours within its range of operation.

Accepted Answer

A. Cost A: Fixed (same total amount at e

Question 7

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.
How much would Swanson's pay if it made 5,500 copies?

Accepted Answer

A)  $382.50 
B)  $322 
C)  $300 
D)  $292.50 
E)  None of the other answers is correct. 
A)  $382.50 
B)  $322 
C)  $300 
D)  $292.50 
E)  None of the other answers is correct.

Question 8

The high-low method and least-squares regression are used by accountants to:

Accepted Answer

A)  evaluate divisional managers for purposes of raises and promotions. 
B)  choose among alternative courses of action. 
C)  maximize output. 
D)  estimate costs. 
E)  control operations. 
A)  evaluate divisional managers for purposes of raises and promotions. 
B)  choose among alternative courses of action. 
C)  maximize output. 
D)  estimate costs. 
E)  control operations.

Question 9

Define the term "relevant range" and explain its importance in understanding cost behavior.

Accepted Answer

The relevant range is the range of activ

Question 10

Which of the following is not an example of a committed fixed cost?

Accepted Answer

A)  Property taxes. 
B)  Depreciation on buildings. 
C)  Salaries of management personnel. 
D)  Outlays for advertising programs. 
E)  Equipment rental costs. 
A)  Property taxes. 
B)  Depreciation on buildings. 
C)  Salaries of management personnel. 
D)  Outlays for advertising programs. 
E)  Equipment rental costs.

Question 11

Parker Corporation observed that when 25,000 units were sold, a particular cost amounted to $75,000, or $3.00 per unit. When volume increased by 10%, the cost totaled $82,500 (i.e., $3.00 per unit). The cost that Parker is studying can best be described as a:

Accepted Answer

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

Question 12

Norde Company is making plans for the introduction of a new product, which has a target selling price of $7 per unit. The following estimates of manufacturing costs have been derived for 6 million units, to be produced during the first year:
Direct material: $6,000,000
Direct labor: $2,100,000 (at $14 per hour)
Overhead costs have not yet been estimated, but monthly data on total production and overhead for the past 12 months have been analyzed by using least-squares regression. The major overhead cost driver is direct labor hours, with the following results:
Computed values:
Fixed overhead cost: $3,200,000
Coefficient of independent variable: $2.25
Required:
A. Prepare the company's regression equation (Y = a + bX) to estimate overhead.
B. Calculate the predicted overhead cost at an activity level of 6,300,000 units.
C. What is Norde's dependent variable in this case?

Accepted Answer

A. Y = $3,200,000 + $2.25X
B. Direct lab

Question 13

Song, Inc., uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40.
On the basis of this information, what were total maintenance costs when the company experienced 23,000 machine hours?

Accepted Answer

A)  $193,200. 
B)  $550,000. 
C)  $734,800. 
D)  $743,200. 
E)  $760,000. 
A)  $193,200. 
B)  $550,000. 
C)  $734,800. 
D)  $743,200. 
E)  $760,000.

Variable costs change in direct proportion to a change in the activity level.

In regression analysis, the variable that is being predicted is known as the independent variable.

What type of cost exhibits the behavior shown below? Manufacturing Volume (Units) Cost Per Unit 50,000 \ 1.95 70,000 1.95

Which of the following choices denotes the typical cost behavior of advertising and sales commissions?

Committed fixed costs would include:

The high-low method and least-squares regression are used by accountants to:

Define the term "relevant range" and explain its importance in understanding cost behavior.

Which of the following is not an example of a committed fixed cost?

Parker Corporation observed that when 25,000 units were sold, a particular cost amounted to $75,000, or $3.00 per unit. When volume increased by 10%, the cost totaled $82,500 (i.e., $3.00 per unit). The cost that Parker is studying can best be described as a:

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

Variable costs change in direct proportion to a change in the activity level.

In regression analysis, the variable that is being predicted is known as the independent variable.

What type of cost exhibits the behavior shown below? Manufacturing Volume (Units) Cost Per Unit 50,000 \ 1.95 70,000 1.95

Which of the following choices denotes the typical cost behavior of advertising and sales commissions?

Committed fixed costs would include:

The high-low method and least-squares regression are used by accountants to:

Define the term "relevant range" and explain its importance in understanding cost behavior.

Which of the following is not an example of a committed fixed cost?

Parker Corporation observed that when 25,000 units were sold, a particular cost amounted to $75,000, or $3.00 per unit. When volume increased by 10%, the cost totaled $82,500 (i.e., $3.00 per unit). The cost that Parker is studying can best be described as a:

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