Question 1

Using the high-low method, we know the true cost line.

Accepted Answer

A) True 
 B)False  False

Question 2

When constructing segmented statements, we use the term segment in a narrow sense.

Accepted Answer

A) True 
 B)False  False

Question 3

The high-low method uses two observations of aggregate cost data to estimate total fixed costs and the unit variable cost.

Accepted Answer

A) True 
 B)False  True

Question 4

The account classification is both time-consuming and subjective in nature.

Accepted Answer

A) True 
 B)False

Question 5

Segmented contribution margin statements can:

Accepted Answer

A)   Be utilized to present both product and region information.
B)   Only be utilized to present product or region information.
C)   Requires the use of high-low or regression analysis modeling for information.
D)   Not be utilized by small companies with few products or services.

Question 6

Common fixed costs:

Accepted Answer

A)   Are also referred to as facility-level costs.
B)   Do not relate to any product in particular but to the entire business.
C)   Are not controllable at the product level.
D)   Both a and b.
E)   a, b, and c.

Question 7

Account classification involves categorizing cost accounts as:

Accepted Answer

A)   Product costs and administrative costs.
B)   Contribution costs and product costs.
C)   Variable costs and fixed costs.
D)   Variable costs and product costs.
E)   Fixed costs from product costs.

Question 8

An advantage of estimating variable costs by the account classification method is

Accepted Answer

A)   It is less demanding than other methods
B)   It provides statistical analysis
C)   It is easy to implement.
D)   It can provide very accurate estimates.
E)   None of the above is an advantage.

Question 9

The regression analysis method of estimating fixed and variable costs uses all available observations to come up with a line that best "fits" the data.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not an example of a segment?

Accepted Answer

A)   Product.
B)   Customer.
C)   Geographical region.
D)   A Store
E)   All of the above could be segments of a firm.

Question 11

The term "contribution margin" denotes:

Accepted Answer

A)   The value attained by subtracting variable and fixed costs from revenues.
B)   The value attained by subtracting variable and fixed costs from net income.
C)   The value attained by subtracting fixed costs from revenues.
D)   The value attained by subtracting variable costs from revenues.

Question 12

Regression analysis:

Accepted Answer

A)   Extracts the minimum amount of information from the data provided to answer the relevant questions.
B)   Extracts the maximum amount of information from the data provided to answer the relevant questions.
C)   Has not major drawbacks due to the complexity of the Excel function effectiveness.
D)   Requires the high and low data to be specifically identified to improve its accuracy.

Question 13

Common fixed costs do not relate to any product in particular but to the entire business.

Accepted Answer

A) True 
 B)False

Question 14

Contribution margin statements:

Accepted Answer

A)   Can be utilized to evaluate the effect of possible activity changes on profit before taxes.
B)   Cannot be utilized to evaluate the effect of possible activity changes if those changes also change fixed costs.
C)   Will not provide an alert if cost behaviors vary from those expected.
D)   Identify variable and fixed costs but will not address changes in revenues.

Question 15

Contribution margin denotes:

Accepted Answer

A)   The amount that remains after subtracting costs of goods sold from revenue.
B)   The amount that remains after subtracting fixed costs from revenue.
C)   The amount that remains after subtracting fixed costs from costs of goods sold.
D)   The amount that remains after subtracting variable costs from revenue.
E)   The amount that remains after subtracting variable costs from costs of goods sold.

Question 16

With advances in computer and information technologies, the account classification task may still be a daunting task.

Accepted Answer

A) True 
 B)False

Question 17

Regression analysis is:

Accepted Answer

A)   The proportion of total costs that are fixed and variable.
B)   A statistical method for estimating fixed and variable costs.
C)   A non-statistical method that uses the normal range of operations to estimate fixed and variable costs.
D)   A firm's normal range of operations in which we expect a stable relation between activity and cost.
E)   None of the above.

Question 18

Most firms rely on future data to estimate their cost structure.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is not true?

Accepted Answer

A)   The high-low method is a non-statistical method, regression analysis is a statistical method.
B)   The high-low method and regression analysis use only two observations to estimate fixed and variable costs.
C)   The mechanics of regression analysis are complex, the mechanics of the high-low method are simple.
D)   Both A and B are untrue.
E)   A, B and C are untrue.

Question 20

Many firms do not choose to use the account classification method because:

Accepted Answer

A)   It is time consuming to implement.
B)   It is subjective in nature.
C)   It does not provide very accurate estimates.
D)   Both a and b.
E)   Both b and c.

Exam 4: Techniques for Estimating Fixed and Variable Costs

Using the high-low method, we know the true cost line.

When constructing segmented statements, we use the term segment in a narrow sense.

The high-low method uses two observations of aggregate cost data to estimate total fixed costs and the unit variable cost.

The account classification is both time-consuming and subjective in nature.

Segmented contribution margin statements can:

Common fixed costs:

Account classification involves categorizing cost accounts as:

An advantage of estimating variable costs by the account classification method is

The regression analysis method of estimating fixed and variable costs uses all available observations to come up with a line that best "fits" the data.

Which of the following is not an example of a segment?

The term "contribution margin" denotes:

Regression analysis:

Common fixed costs do not relate to any product in particular but to the entire business.

Contribution margin statements:

Contribution margin denotes:

With advances in computer and information technologies, the account classification task may still be a daunting task.

Regression analysis is:

Most firms rely on future data to estimate their cost structure.

Which of the following statements is not true?

Many firms do not choose to use the account classification method because: