| Question |
Answer |
| Cost Behavior is the general term for describing whether costs change as output changes |
TRUE - cost behavior studies the different ways that costs reacts to output changes |
| Fixed costs always stay the same in total as output changes regardless of the relevant range |
FALSE |
| RF company manufactures furniture. if furnitature were the cost object, the nails used to make the furniture would be considered a variable cost |
TRUE - the amount of nails used would vary according the amount of furniture manufactured. |
| In the long run all costs are fixed |
FALSE |
| The cost of flexible resources is fixed |
FALSE - flexible resources are supplied when needed, the costs of flexible resources increases as demand for the resources increases. thus, flexible resources are variable. committed resources are fixed |
| Committed resources may give rise to unused capacity |
TRUE - when committed resources are purchased, the resource supplied is greater than the resource usage; this gives rise to unused capacity. flexible resources do not give rise to unused capacity. |
| The relevant range is a wide range of activity where total variable costs remain the same |
FALSE - Total fixed costs remain the same within the relevant range of activity. |
| An estimate of the total fixed cost is the intercept parameter where Total cost = Fixed cost + (Variable |
TRUE - |
| The high-low method calculates a better estimate of the cost formula than the method of least squares |
FALSE - The method of least squares calculates a better cost formula because it considers all the |
| Manufacturing overhead is usually a: |
mixed cost. -Manufacturing overhead is usually a mixed cost |
| Within the relevant range of activity, if the level of activity increases, variable cost per unit |
remains the same - Variable cost per unit remains the same |
| Within the relevant range of activity, total fixed cost will: |
remain constant. - Total fixed cost remains constant and total variable cost increases in proportion with the level of |
| An example of a variable cost is: |
commissions paid to salesmen based on units sold - Commissions are variable costs because total commissions paid vary with sales |
| An example of a committed fixed cost is |
property taxes on factory building - Advertising is a discretionary fixed cost. |
| Which is the best method for separating mixed costs into fixed and variable components? |
method of least squares - Scatterplot method is subjective |
| The Starry Corporation developed a cost function for manufacturing overhead: Manufacturing overhead = $10,000 |
$10,000 + ($2 x 14,000) = $38,000 |
| Blurry Company shipped 10,000 units for $36,000 in April and 12,000 units for $40,000 in May. The estimated cost |
Variable costs = ($40,000 - $36,000)/(12,000 - 10,000) = $2 |
| The following cost function to estimate manufacturing overhead was estimated using the method of least squares: |
The intercept parameter is $40. . The slope parameter is $2 |
| Which method would quickly detect a nonlinear relationship between activity cost and activity output? |
The scatterplot method plots all the activity cost observations at various levels of activities. It will |
Buen Viaje lv.2 ch 8
