Question 1

Which statement best describes the relationship between per-unit fixed costs and output?

Accepted Answer

A)  Per-unit fixed costs decrease as output increases. 
B)  Per-unit fixed costs increase as output increases. 
C)  Per-unit fixed costs decrease as output decreases. 
D)  Per-unit fixed costs stay the same as output changes.

Question 2

Refer to Regina Company. Assume that 5,000 machine hours will be incurred in April. What would be the predicted cost of equipment maintenance for April when using the cost formula for equipment maintenance?

Accepted Answer

A)  $32,000 
B)  $93,000 
C)  $125,000 
D)  $157,000

Question 3

Refer to Prince Edward Company. What is the variable rate of maintenance cost when using the results of regression?

Accepted Answer

A)  $9.82 per machine hour 
B)  $9.85 per machine hour 
C)  $12.14 per machine hour 
D)  $12.74 per machine hour

Question 4

Refer to Edmonton Company. What would be the estimate of electricity cost if the factory incurred 4,700 labour hours next month?

Accepted Answer

A)  $9,400 
B)  $19,560 
C)  $20,260 
D)  $23,140

Question 5

Match each following terms with their correct description from the items listed below.
-Will decrease on a per-unit basis as output increases

Accepted Answer

A) Variable cost 
B) Fixed cost 
C) Mixed cost 
D) Step cost

Question 6

Select the appropriate classification of each of the costs 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.
-Cost of registering automobiles

Accepted Answer

A) Variable cost 
B) Fixed cost

Question 7

A cost that changes in total as output changes is a variable cost.

Accepted Answer

A) True 
 B)False

Question 8

Select the appropriate classification of each of the costs 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.
-Salary of manager

Accepted Answer

A) Discretionary fixed cost 
B) Committed fixed cost

Question 9

Which of the following is the best example of a committed fixed cost for a coffee shop?

Accepted Answer

A)  wages 
B)  coffee cups 
C)  coffee beans 
D)  property taxes

Question 10

Why would cost behaviour change outside of the relevant range?

Accepted Answer

The answer of Why would cost behaviour change outside of...

Question 11

Managerial judgment is a factor in determining cost behaviour.

Accepted Answer

A) True 
 B)False

Question 12

Which statement best describes the scattergraph method?

Accepted Answer

A)  It shows a visual fit of data points. 
B)  It is complex and time consuming. 
C)  It uses only the high and low points. 
D)  It does not reveal the presence of outliers.

Question 13

Refer to Edmonton Company. Which of the following is the set of high and low months? High Low

Accepted Answer

A)  May July 
B)  May August 
C)  June August 
D)  June July

Question 14

Refer to the Crazy Toys, Inc. What is the materials cost per unit of output?

Accepted Answer

A)  $0.10 
B)  $0.30 
C)  $0.40 
D)  $0.60

Question 15

When a mixed cost is graphed, what does the slope of the line represent?

Accepted Answer

A)  the total cost per unit 
B)  the sales price per unit 
C)  the fixed cost per unit of output 
D)  the variable cost per unit of the activity driver

Question 16

Which of the following is the best example of a fixed cost in a fast-food restaurant?

Accepted Answer

A)  monthly electric bill 
B)  shift manager's salary 
C)  cost of flour for pizza crust 
D)  cost of pepperoni for pizza topping

Question 17

Select the appropriate classification of each of the costs 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.
-Factory insurance

Accepted Answer

A) Variable cost 
B) Fixed cost

Question 18

Refer to Drumheller Company. Which element is the dependent variable?

Accepted Answer

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

Question 19

Which of the following is the best example of a variable cost in a factory?

Accepted Answer

A)  factory building rent 
B)  lubricant for machinery 
C)  product advertising costs 
D)  factory supervisor's salary

Question 20

What is the formula to calculate a mixed cost?

Accepted Answer

A)  total cost = fixed rate × amount of output 
B)  total cost = variable rate × amount of output 
C)  total cost = total fixed cost - (variable rate × amount of output) 
D)  total cost = total fixed cost + (variable rate × amount of output)

Exam 3: Cost Behaviour