Question 1

When only one coefficient is statistically greater than zero this means it is likely that the cost being estimated is not a mixed cost.

Accepted Answer

A) True 
 B)False

Question 2

In a regression equation, variable costs per unit are represented by the:

Accepted Answer

A)  Slope 
B)  Intercept 
C)  Error term 
D)  Adjusted R-square coefficient

Question 3

Cost behaviour refers to the way that costs vary in relation to changes in an organisation's activities.

Accepted Answer

A) True 
 B)False

Question 4

The line rental paid on a telephone account is an example of a variable cost.

Accepted Answer

A) True 
 B)False

Question 5

A hospital would have mainly fixed costs because its costs do not vary based on the number of patients it treats.

Accepted Answer

A) True 
 B)False

Question 6

When using the two point method of cost estimation or the high low method, the calculation to derive the variable cost component of a mixed cost is: change in cost ÷ change in cost driver.

Accepted Answer

A) True 
 B)False

Question 7

Total variable costs change proportionately with changes in activity levels.

Accepted Answer

A) True 
 B)False

Question 8

Keep Smiling Dental Surgery is located in Christchurch. The company employs three dentists, four dental assistants and two receptionists who book appointments and keep records. The surgery provides a range of services including general dental care, paediatric dental care and teeth whitening. The clinic includes a small retail section that carries specialised products for home treatment. Keep Smiling has recently secured a contract with the Christchurch branch of a major bank to treat their staff. Currently each dentist can treat 35 patients per week. However the new contract means that they will have a total of 100 patients per week. This means that they will need to employ an additional dentist to cope with the increased demand. No other changes are required to the surgery. The cost attached to employing a new dentist is an example of a:

Accepted Answer

A)  stepwise linear cost function 
B)  marginal cost 
C)  mixed cost 
D)  variable cost

Exam 2: Cost Concepts, Behaviour and Estimation

When only one coefficient is statistically greater than zero this means it is likely that the cost being estimated is not a mixed cost.

In a regression equation, variable costs per unit are represented by the:

Cost behaviour refers to the way that costs vary in relation to changes in an organisation's activities.

The line rental paid on a telephone account is an example of a variable cost.

A hospital would have mainly fixed costs because its costs do not vary based on the number of patients it treats.

When using the two point method of cost estimation or the high low method, the calculation to derive the variable cost component of a mixed cost is: change in cost ÷ change in cost driver.

Total variable costs change proportionately with changes in activity levels.