Question 1

Match each following terms with their correct description from the items listed below.
-The range of output over which the assumed cost relationship is valid

Accepted Answer

A) Relevant range 
B) Cost behaviour 
C) Driver 
D) Variable cost 
E) Fixed cost 
A) Relevant range 
B) Cost behaviour 
C) Driver 
D) Variable cost 
E) Fixed cost

Question 2

Refer to Prince Edward Company. Assume that 400 machine hours are budgeted. What would be the budgeted cost for maintenance next month?

Accepted Answer

A)  $985 
B)  $2,943 
C)  $3,928 
D)  $4,913 
A)  $985 
B)  $2,943 
C)  $3,928 
D)  $4,913

Question 3

Suppose a cost's step-cost behaviour follows very narrow steps. What assumptions can be used to approximate the costs?

Accepted Answer

A)  fixed cost assumptions 
B)  mixed cost assumptions 
C)  variable cost assumptions 
D)  step-fixed cost assumptions 
A)  fixed cost assumptions 
B)  mixed cost assumptions 
C)  variable cost assumptions 
D)  step-fixed cost assumptions

Question 4

Match each following terms with their correct description from the items listed below.
-May be discretionary or committed

Accepted Answer

A) Relevant range 
B) Cost behaviour 
C) Driver 
D) Variable cost 
E) Fixed cost 
A) Relevant range 
B) Cost behaviour 
C) Driver 
D) Variable cost 
E) Fixed cost

Question 5

A variable cost decreases in total and per-unit when output decreases.

Accepted Answer

A) True 
 B)False

Question 6

Refer to Montreal Clothing Store. What would the "total cost" be for 1,000 customers?

Accepted Answer

A)  $166,380 
B)  $312,479 
C)  $317,620 
D)  $75,862,000 
A)  $166,380 
B)  $312,479 
C)  $317,620 
D)  $75,862,000

Question 7

Which of the following is characteristic of a mixed cost?

Accepted Answer

A)  contains only variable costs 
B)  will increase as output decreases 
C)  will decrease as output increases 
D)  contains both a fixed and variable component 
A)  contains only variable costs 
B)  will increase as output decreases 
C)  will decrease as output increases 
D)  contains both a fixed and variable component

Question 8

Refer to Saskatoon Company. When using the least squares (regression) method, what is the yearly utility cost equation (with all variables to the nearest penny)?

Accepted Answer

A)  total utility cost = $8.83 + ($10,630.80 × machine hours) 
B)  total utility cost = $10,630.80 + ($8.83 × machine hours) 
C)  total utility cost = $10,630.80 - ($8.83 × machine hours) 
D)  total utility cost = $127,569.60 + ($8.83 × machine hours) 
A)  total utility cost = $8.83 + ($10,630.80 × machine hours) 
B)  total utility cost = $10,630.80 + ($8.83 × machine hours) 
C)  total utility cost = $10,630.80 - ($8.83 × machine hours) 
D)  total utility cost = $127,569.60 + ($8.83 × machine hours)

Question 9

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-Relies on the quality of the subjective judgment of the analyst

Accepted Answer

A) High-low method 
B) Scattergraph method 
C) Least squares (regression) method 
A) High-low method 
B) Scattergraph method 
C) Least squares (regression) method

Question 10

If output increases, what will result?

Accepted Answer

A)  Total mixed costs will decrease. 
B)  Per-unit fixed cost will decrease. 
C)  Total variable costs will decrease. 
D)  Total mixed costs will stay the same. 
A)  Total mixed costs will decrease. 
B)  Per-unit fixed cost will decrease. 
C)  Total variable costs will decrease. 
D)  Total mixed costs will stay the same.

Question 11

Which statement best describes mixed costs?

Accepted Answer

A)  They stay the same regardless of output. 
B)  They decrease in total when output decreases. 
C)  They have the same cost behaviour as a step cost. 
D)  They vary in direct proportion to changes in output. 
A)  They stay the same regardless of output. 
B)  They decrease in total when output decreases. 
C)  They have the same cost behaviour as a step cost. 
D)  They vary in direct proportion to changes in output.

Question 12

Refer to Drumheller Company. Which element is the slope?

Accepted Answer

A)  output 
B)  total cost 
C)  fixed cost 
D)  variable rate 
A)  output 
B)  total cost 
C)  fixed cost 
D)  variable rate

Question 13

Which formula calculates the variable rate of a mixed cost when using the high-low method?

Accepted Answer

A) 
$\frac{\text {high point output - low point output }}{\text {high point cost - low point cost }}$ 
B) 
$\frac{\text { high point cost - low point cost }}{\text { high point output - low point output }}$ 
C)  total cost at high point - (variable rate × output at low point) 
D)  total cost at high point - (variable rate × output at high point) 
A) 
$\frac{\text {high point output - low point output }}{\text {high point cost - low point cost }}$ 
B) 
$\frac{\text { high point cost - low point cost }}{\text { high point output - low point output }}$ 
C)  total cost at high point - (variable rate × output at low point) 
D)  total cost at high point - (variable rate × output at high point)

Question 14

Using Microsoft Excel, the function INTERCEPT returns the variable rate of the independent variable.

Accepted Answer

A) True 
 B)False

Question 15

Select the appropriate classification of each of the items listed below.
-$6.53 × independent variable

Accepted Answer

A) Variable rate 
B) Fixed cost 
C) Variable cost 
D) Cost equation 
E) Coefficient of determination 
A) Variable rate 
B) Fixed cost 
C) Variable cost 
D) Cost equation 
E) Coefficient of determination

Question 16

London Company makes hearing aids. London has found that total electricity cost for the factory can be represented by the following formula: total annual electricity cost = $165,000 + $2.75x, where x = labour hours. Last year, London incurred 225,000 labour hours.
Required:
A. Identify the independent variable in London's cost formula.B. Calculate the total electricity cost incurred by London last year.
C. Calculate London Company's estimated electricity cost for next year if they have budgeted 245,000 labour hours.

Accepted Answer

A. labour hours
B. $165,000 +

Question 17

Prince Albert 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.
Janitorial Labour
Month cost hours
January $9,200 10,120
February 8,800 9,500
March 9,350 10,500
April 9,620 11,100
May 8,400 8,660
June 9,400 10,650
Required:
A. Using the high-low method, calculate the variable rate of the janitorial cost.
B. Using the high-low method, calculate the fixed cost of janitorial services.
C. Calculate the estimated janitorial cost to be incurred during the next six months assuming that 58,200 labour hours will be worked.

Accepted Answer

A. ($9,620 - $8,400)/(11,100 ?

Question 18

The cost accountant for Vancouver Company used an Excel spreadsheet program to run ordinary least squares (regression) method on a set of monthly cost data for its utility cost. Vancouver's cost driver for utility cost is machine hours. The following results were produced.
Intercept 3,500
X Variable 3.75
Required:
A. Construct the cost formula for Vancouver's utility cost using the results from the least squares (regression) method.
B. Using the formula calculated in (A), calculate the estimated cost of utilities for May assuming that Vancouver will incur 150,000 machine hours?

Accepted Answer

A. Total utility cost = $3,500

Question 19

Why is managerial judgment essential to predicting cost behaviour?

Accepted Answer

Managerial judgment is important because

Question 20

Which statement best describes the relationship between total variable costs and output?

Accepted Answer

A)  Total variable costs increase as output decreases. 
B)  Total variable costs decrease as output increases. 
C)  Total variable costs stay the same as output changes. 
D)  Total variable costs = variable rate × amount of output. 
A)  Total variable costs increase as output decreases. 
B)  Total variable costs decrease as output increases. 
C)  Total variable costs stay the same as output changes. 
D)  Total variable costs = variable rate × amount of output.

Match each following terms with their correct description from the items listed below. -The range of output over which the assumed cost relationship is valid

Refer to Prince Edward Company. Assume that 400 machine hours are budgeted. What would be the budgeted cost for maintenance next month?

Suppose a cost's step-cost behaviour follows very narrow steps. What assumptions can be used to approximate the costs?

Match each following terms with their correct description from the items listed below. -May be discretionary or committed

A variable cost decreases in total and per-unit when output decreases.

Refer to Montreal Clothing Store. What would the "total cost" be for 1,000 customers?

Which of the following is characteristic of a mixed cost?

Refer to Saskatoon Company. When using the least squares (regression) method, what is the yearly utility cost equation (with all variables to the nearest penny)?

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Relies on the quality of the subjective judgment of the analyst

If output increases, what will result?

Which statement best describes mixed costs?

Refer to Drumheller Company. Which element is the slope?

Which formula calculates the variable rate of a mixed cost when using the high-low method?

Using Microsoft Excel, the function INTERCEPT returns the variable rate of the independent variable.

Select the appropriate classification of each of the items listed below. -$6.53 × independent variable

Why is managerial judgment essential to predicting cost behaviour?

Which statement best describes the relationship between total variable costs and output?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters

Exam 3: Cost Behaviour

Match each following terms with their correct description from the items listed below. -The range of output over which the assumed cost relationship is valid

Refer to Prince Edward Company. Assume that 400 machine hours are budgeted. What would be the budgeted cost for maintenance next month?

Suppose a cost's step-cost behaviour follows very narrow steps. What assumptions can be used to approximate the costs?

Match each following terms with their correct description from the items listed below. -May be discretionary or committed

A variable cost decreases in total and per-unit when output decreases.

Refer to Montreal Clothing Store. What would the "total cost" be for 1,000 customers?

Which of the following is characteristic of a mixed cost?

Refer to Saskatoon Company. When using the least squares (regression) method, what is the yearly utility cost equation (with all variables to the nearest penny)?

Match each following terms with their correct description from the items listed below.Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Relies on the quality of the subjective judgment of the analyst

If output increases, what will result?

Which statement best describes mixed costs?

Refer to Drumheller Company. Which element is the slope?

Which formula calculates the variable rate of a mixed cost when using the high-low method?

Using Microsoft Excel, the function INTERCEPT returns the variable rate of the independent variable.

Select the appropriate classification of each of the items listed below. -$6.53 × independent variable

Why is managerial judgment essential to predicting cost behaviour?

Which statement best describes the relationship between total variable costs and output?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters