Question 1

Select the appropriate item for each of the definitions listed below.
-the range of output over which the assumed cost relationship is valid

Accepted Answer

A) relevant range 
B) cost behavior 
C) driver 
D) variable cost 
E) fixed cost

Question 2

Select the appropriate cost behavior for the following costs incurred by an automobile manufacturer.
-cost of windshields

Accepted Answer

A) variable 
B) fixed

Question 3

NOT: 2 min.Figure 3-8.Martin Company makes cell phones. The company controller wanted to calculate the fixed and variable costs associated with electricity use in the factory. Data for the past four months were collected.  Coefficients shown by a regression program are:
 
-Refer to Figure 3-8. Using the results of regression, what would be the total budgeted cost for electricity next month assuming that 615 machine hours are budgeted?

Accepted Answer

A)  $2,225 
B)  $8,240 
C)  $8,085 
D)  $4,015

Question 4

NOT: 2 min.Figure 3-8.Martin Company makes cell phones. The company controller wanted to calculate the fixed and variable costs associated with electricity use in the factory. Data for the past four months were collected.  Coefficients shown by a regression program are:
 
-Refer to Figure 3-8. Using the results of regression, calculate the fixed cost of electricity.

Accepted Answer

A)  $2,255 
B)  $9.48 
C)  $2,200 
D)  None of these are correct.

Question 5

Select the appropriate item for each of the definitions listed below.
-must be purchased in chunks

Accepted Answer

A) committed fixed cost 
B) discretionary fixed cost 
C) mixed cost 
D) step cost

Question 6

Select the appropriate cost behavior for each of the costs listed below.
-sales commissions

Accepted Answer

A) variable 
B) fixed

Question 7

The method of least squares

Accepted Answer

A)  uses the results of regression analysis to construct a cost formula. 
B)  is the least accurate method. 
C)  analyzes a cost relationship by plotting the data points on a graph. 
D)  can easily be calculated by hand.

Question 8

Margolo Company makes cross-country skis. The company controller wants to calculate the fixed and variable costs associated with janitorial services incurred by the factory. Data for the past six months were collected.
  Required:

Accepted Answer

The answer of Margolo Company makes cross-country skis. The company...

Question 9

Which of the following would probably be a fixed cost in a fast-food restaurant?

Accepted Answer

A)  cost of hamburger 
B)  cost of french fries 
C)  shift manager's salary 
D)  utility cost

Question 10

Ruskin Company had utilities cost of $95,000 at an output level of 30,000 units. The utilities cost was a mixed cost and the fixed portion was $50,000. What would the estimate of total utilities cost be at an output level of 40,000 units?

Accepted Answer

A)  $65,000 
B)  $95,000 
C)  $110,000 
D)  $125,000

Question 11

Fixed cost per unit is $9 when 20,000 units are produced and $6 when 30,000 units are produced. What is the total fixed cost when nothing is produced?

Accepted Answer

A)  $180,000 
B)  $360,000 
C)  $150,000 
D)  $240,000

Question 12

A _______________ displays a constant level of cost for a range of output and then jumps to a higher level of cost at some point.

Accepted Answer

The answer of A _______________ displays a constant level of...

Question 13

Which of the following is an advantage of using the scatter-graph method over the high-low method to estimate costs?

Accepted Answer

A)  It is a statistical method to determine "best fit". 
B)  A cost analyst can review the data visually and eliminate outliers. 
C)  The quality of the cost formula relies on the objective judgment of the analysts. 
D)  The cost formula can be determined simply by looking at two points of data.

Question 14

Harnock Company constructed the following cost formula for its monthly janitorial cost.
Total monthly janitorial cost = $5,000 + ($.48 * units of output)
Required:

Accepted Answer

The answer of Harnock Company constructed the following cost formula...

Question 15

Just Burn It! Manufactures blank CDs. The company incurs $22,000 in monthly depreciation costs on its manufacturing equipment as well as monthly advertising costs of $2,000 to place ads in newspapers and on the radio. Each CD requires materials and manufacturing overhead resources. On average the company uses 26,000 pounds of material to manufacture 12,000 CDs per month. Each pound of material costs $2.50. The manufacturing overhead is driven by machine hours and on average the company incurs $30,000 in manufacturing overhead to produce 12,000 CDs per month.

Accepted Answer

The answer of Just Burn It! Manufactures blank CDs. The...

Question 16

If production volume increases from 8,000 to 10,000 units,

Accepted Answer

A)  total costs will increase by 20%. 
B)  total costs will increase by 25%. 
C)  total variable costs will increase by 25%. 
D)  mixed and variable costs will increase by 25%.

Question 17

Select the appropriate item for each of the definitions listed below.
-allows a cost analyst to inspect the data visually

Accepted Answer

A) high-low method 
B) scatter-graph method 
C) method of least squares

Question 18

Consider each of the following independent situations.
  Required: For each situation, describe the cost as one of the following: fixed cost, variable cost, mixed cost, or step cost.

Accepted Answer

The answer of Consider each of the following independent situations.
...

Question 19

The average unit cost at a monthly volume of 9,000 units is $3, and the average unit cost at a monthly volume of 22,500 units is $2.10.
Required:

Accepted Answer

The answer of The average unit cost at a monthly...

Question 20

Select the appropriate type of cost for each of the definitions listed below.
-total cost = total fixed cost + total variable cost

Accepted Answer

A) variable 
B) fixed 
C) mixed 
D) step

Exam 3: Cost Behavior

Select the appropriate item for each of the definitions listed below. -the range of output over which the assumed cost relationship is valid

Select the appropriate cost behavior for the following costs incurred by an automobile manufacturer. -cost of windshields

Select the appropriate item for each of the definitions listed below. -must be purchased in chunks

Select the appropriate cost behavior for each of the costs listed below. -sales commissions

The method of least squares

Margolo Company makes cross-country skis. The company controller wants to calculate the fixed and variable costs associated with janitorial services incurred by the factory. Data for the past six months were collected. Required:

Which of the following would probably be a fixed cost in a fast-food restaurant?

Ruskin Company had utilities cost of $95,000 at an output level of 30,000 units. The utilities cost was a mixed cost and the fixed portion was $50,000. What would the estimate of total utilities cost be at an output level of 40,000 units?

Fixed cost per unit is $9 when 20,000 units are produced and $6 when 30,000 units are produced. What is the total fixed cost when nothing is produced?

A _______________ displays a constant level of cost for a range of output and then jumps to a higher level of cost at some point.

Which of the following is an advantage of using the scatter-graph method over the high-low method to estimate costs?

Harnock Company constructed the following cost formula for its monthly janitorial cost. Total monthly janitorial cost = $5,000 + ($.48 * units of output) Required:

If production volume increases from 8,000 to 10,000 units,

Select the appropriate item for each of the definitions listed below. -allows a cost analyst to inspect the data visually

Consider each of the following independent situations. Required: For each situation, describe the cost as one of the following: fixed cost, variable cost, mixed cost, or step cost.

The average unit cost at a monthly volume of 9,000 units is $3, and the average unit cost at a monthly volume of 22,500 units is $2.10. Required:

Select the appropriate type of cost for each of the definitions listed below. -total cost = total fixed cost + total variable cost