Question 1

Within the relevant range of activity, costs:

Accepted Answer

A) can be estimated with reasonable accuracy. 
B) can be expected to change radically. 
C) exhibit decreasing marginal cost patterns. 
D) exhibit increasing marginal cost patterns. 
E) cannot be estimated satisfactorily. 
A) can be estimated with reasonable accuracy. 
B) can be expected to change radically. 
C) exhibit decreasing marginal cost patterns. 
D) exhibit increasing marginal cost patterns. 
E) cannot be estimated satisfactorily. A

Question 2

A variable cost that has a definitive physical relationship to the activity measure is called a(n):

Accepted Answer

A) discretionary cost. 
B) engineered cost. 
C) managed cost. 
D) programmed cost. 
E) committed cost. 
A) discretionary cost. 
B) engineered cost. 
C) managed cost. 
D) programmed cost. 
E) committed cost. B

Question 3

Rideau Manufacturing Company has only variable costs and fixed costs. A review of the company's records disclosed that when 200,000 units were produced, fixed manufacturing costs amounted to $800,000 and the cost per unit manufactured was $11. On the basis of this information, how much total cost would Rideau anticipate at an activity level of 202,000 units?

Accepted Answer

A) $800,000. 
B) $1,608,000. 
C) $2,200,000. 
D) $2,214,000. 
E) $2,222,000. 
A) $800,000. 
B) $1,608,000. 
C) $2,200,000. 
D) $2,214,000. 
E) $2,222,000. E

Question 4

In regression analysis, the variable -cost component that is being predicted is known as the:

Accepted Answer

A) independent variable. 
B) dependent variable. 
C) explanatory variable. 
D) interdependent variable. 
E) functional variable. 
A) independent variable. 
B) dependent variable. 
C) explanatory variable. 
D) interdependent variable. 
E) functional variable.

Question 5

The relevant range is that range of activity:

Accepted Answer

A) where a company achieves its maximum efficiency. 
B) where units produced equal units sold. 
C) where management expects the company to operate. 
D) where the company will earn a profit. 
E) where expected results are abnormally high. 
A) where a company achieves its maximum efficiency. 
B) where units produced equal units sold. 
C) where management expects the company to operate. 
D) where the company will earn a profit. 
E) where expected results are abnormally high.

Question 6

Consider the graphs that follow (the horizontal axis represents activity; the vertical axis represents total dollars).   Required:
For items A-I that follow, choose the graph that best represents the cost behaviour pattern described. Note: Graphs can be used more than once.
A. Straight-line depreciation on machinery.
B. The cost of chartering a private airplane. The cost is $800 per hour for the first 6 hours of a flight; it then drops to $600 per hour.
C. The wages of table service personnel in a restaurant. The employees are part-time workers who can be called upon for as little as 4 hours at a time.
D. Weekly wages of store clerks who work 40 hours each week. One clerk is hired for every 125 sales made during the month.
E. The cost of tires used in the production of trucks.
Up to 20,000 kilowatt hours (KWH): $4,000
Above 20,000 kilowatt hours: $4,000 + $0.02 per KWH

Accepted Answer

A. 2 B. 4

Question 7

Zurbrigg Copy Solutions presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Zurbrigg made 9,000 copies and paid a total of $560 in July; in November, the firm paid $480 for 7,000 copies. The company uses the high-low method to analyze costs. Zurbrigg's monthly fixed fee is:

Accepted Answer

A) $200. 
B) $461. 
C) $480. 
D) $515. 
E) $560 
A) $200. 
B) $461. 
C) $480. 
D) $515. 
E) $560

Question 8

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 9

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 10

Each of Acorn Manufacturing's production managers can oversee 80,000 machine hours of manufacturing activity. The annual salary of a production manager is $55,000. If Acorn has 60,000 hours of manufacturing activity, one manager is needed; for 100,000 hours, two managers are needed; for 150,000 hours, three managers are needed; and so forth. Acorn's salary cost can best be described as a:

Accepted Answer

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

Question 11

Around Town Incorporated operates a small package delivery service in the Chicago suburbs. If the company uses a regression equation to forecast total operating costs, the equation's intercept 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 12

Miles Corporation has a fixed utilities cost. If sales volume increases, how will the total fixed cost and the fixed cost per unit behave? $\begin{array} { | r | l | l | } 
\hline & \text { Total Fixed Cost } & \text { Fixed Cost Per Unit } \
\hline \mathbf { 1 }  & \text { Increase } & \text { Increase } \
\hline \mathbf { 2 } & \text { Increase } & \text { Remain Constant } \
\hline \mathbf { 3 } & \text { Increase } & \text { Decrease } \
\hline \mathbf { 4 } & \text { Remain Constant } & \text { Decrease } \
\hline \mathbf { 5 } & \text { Decrease } & \text { Increase } \
\hline
\end{array}$

Accepted Answer

A) 1. 
B) 2. 
C) 3. 
D) 4. 
E) 5. 
A) 1. 
B) 2. 
C) 3. 
D) 4. 
E) 5.

Question 13

North 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 labour: $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 labour 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 North's dependent variable in this case?
D. How can the company evaluate the "quality" of its regression equation?

Accepted Answer

A. @#LAT-DLM&

B. Direct labour
For 6 million unit

Question 14

Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the vertical axis representing the per-unit cost and the horizontal axis representing the number of units sold, how would a line that depicts sales commissions per unit be drawn?

Accepted Answer

A) As a straight diagonal line, sloping upward to the right. 
B) As a straight diagonal line, sloping downward to the right. 
C) As a horizontal line. 
D) As a vertical line. 
E) As a curvilinear line. 
A) As a straight diagonal line, sloping upward to the right. 
B) As a straight diagonal line, sloping downward to the right. 
C) As a horizontal line. 
D) As a vertical line. 
E) As a curvilinear line.

Question 15

Sweetland Company, which uses the high-low method to analyze cost behaviour, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 700 machine hours to a high of 1,200 machine hours, with the following data being available for the first six months of the year: $\begin{array} { | l | r | r | } 
\hline{ \text { Month } } & \text { Utilities } & \text { Machine Hours } \
\hline \text { January } & \$ 8,900 & 800 \
\text { February } & \$ 8,560 & 720 \
\text { March } & \$ 9,150 & \$ 10 \
\text { April } & \$ 9,560 & 920 \
\text { May } & \$ 9,825 & 950 \
\text { June } & \$ 9,350 & 900 \
\hline
\end{array}$ Using the high-low method, the utilities cost associated with 980 machine hours would be:

Accepted Answer

A) $9,900. 
B) $12,422. 
C) $12,812. 
D) $13,952. 
E) $15,044. 
A) $9,900. 
B) $12,422. 
C) $12,812. 
D) $13,952. 
E) $15,044.

Question 16

Which of the following choices denotes the typical cost behaviour of advertising and sales commissions? $\begin{array} { | l | l | l | l | } 
\hline & \text { Advertising } & &\text { Sales } \
&&&\text { Commissions }\

\hline 1 & \text { Variable } & & \text { Variable } \
\hline 2 & \text { Variable } & & \text { liixed } \
\hline 3 & \text { lixed } & & \text { Variable } \
\hline 4 & \text { Fixed } & & \text { Fixed } \
\hline 5 & \text { Semi-variable } & & \text { Variable } \
\hline
\end{array}$

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 17

Ballard Manufacturing Inc. uses least-squares regression to analyze a variety of operating costs. A staff assistant determined that monthly machine hours (MH) have a strong cause-and-effect relationship with maintenance costs, and generated the following statistics:
Intercept: $200,000
b coefficient: $5.20
Total machine hours for the year: 40,500
Required:
A. Construct the company's regression equation.
B. Based on your answer in part "A," identify Wellington's dependent variable and independent variable.
C. What does the b coefficient really represent?
D. Predict the company's maintenance cost in a month when 4,000 machine hours are worked.

Accepted Answer

A. Y = $200,000 + $5.20MH
B. Y (total ma

Question 18

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. $\begin{array}{|l|l|l|l|l|l|l|l|}
\hline&\text { Type A}&&\text { Type B}&&\text { Type C}&&\text { Total } \
\hline 5,000 \text { units } & \$ 4 & & \$ 9 && \$ 4 & & \$ 17 \
\hline 7.500 \text { units } & \$ 4 && \$ 6 & &\$ 3 & & \$ 13 \
\hline
\end{array}$ The cost formula that expresses the behaviour of Yang's total cost is:

Accepted Answer

A) Y = $0 + $17X. 
B) Y = $20,000 + $13X. 
C) Y = $40,000 + $9X. 
D) Y = $45,000 + $4X. 
E) Y = $60,000 + $5X. 
A) Y = $0 + $17X. 
B) Y = $20,000 + $13X. 
C) Y = $40,000 + $9X. 
D) Y = $45,000 + $4X. 
E) Y = $60,000 + $5X.

Question 19

Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?

Accepted Answer

A) Semi-variable cost. 
B) Curvilinear cost. 
C) Step-fixed cost. 
D) Step-variable cost. 
E) Fixed cost. 
A) Semi-variable cost. 
B) Curvilinear cost. 
C) Step-fixed cost. 
D) Step-variable cost. 
E) Fixed cost.

Question 20

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

Accepted Answer

The relevant range is the range of activ

Within the relevant range of activity, costs:

A variable cost that has a definitive physical relationship to the activity measure is called a(n):

In regression analysis, the variable -cost component that is being predicted is known as the:

The relevant range is that range of activity:

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

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:

Around Town Incorporated operates a small package delivery service in the Chicago suburbs. If the company uses a regression equation to forecast total operating costs, the equation's intercept would correspond to the:

Miles Corporation has a fixed utilities cost. If sales volume increases, how will the total fixed cost and the fixed cost per unit behave? Total Fixed Cost Fixed Cost Per Unit Increase Increase Increase Remain Constant Increase Decrease Remain Constant Decrease Decrease Increase

Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the vertical axis representing the per-unit cost and the horizontal axis representing the number of units sold, how would a line that depicts sales commissions per unit be drawn?

Which of the following choices denotes the typical cost behaviour of advertising and sales commissions? Advertising Sales Commissions 1 Variable Variable 2 Variable liixed 3 lixed Variable 4 Fixed Fixed 5 Semi-variable Variable

Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?

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

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, 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

Filters

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

Within the relevant range of activity, costs:

A variable cost that has a definitive physical relationship to the activity measure is called a(n):

In regression analysis, the variable -cost component that is being predicted is known as the:

The relevant range is that range of activity:

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

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:

Around Town Incorporated operates a small package delivery service in the Chicago suburbs. If the company uses a regression equation to forecast total operating costs, the equation's intercept would correspond to the:

Miles Corporation has a fixed utilities cost. If sales volume increases, how will the total fixed cost and the fixed cost per unit behave? Total Fixed Cost Fixed Cost Per Unit Increase Increase Increase Remain Constant Increase Decrease Remain Constant Decrease Decrease Increase

Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the vertical axis representing the per-unit cost and the horizontal axis representing the number of units sold, how would a line that depicts sales commissions per unit be drawn?

Which of the following choices denotes the typical cost behaviour of advertising and sales commissions? Advertising Sales Commissions 1 Variable Variable 2 Variable liixed 3 lixed Variable 4 Fixed Fixed 5 Semi-variable Variable

Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?

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

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, 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

Filters