Deck 6: Activity Analysis, Cost Behavior, and Cost Estimation

Question 1

Outliers are a common data collection problem.

Answer 1

True

Question 2

An example of a discretionary cost is the cost of research and development.

Answer 2

True

Question 3

The relevant range is that range of activity where a company achieves its maximum efficiency.

Answer 3

False

Question 4

The determination of cost behavior is called cost prediction.

Question 5

Multiple regression is a statistical method that estimates a linear (straight-line) relationship between one dependent variable and one independent variable.

Question 6

Cost that are nearly variable, but increase in small steps instead of continuously are called step-variable costs.

Question 7

Cost estimation typically focuses on the future.

Question 8

Variable costs change in direct proportion to a change in the activity level.

Question 9

The relationship between cost and activity is known as:

A)cost estimation.
B)cost prediction.
C)cost behavior.
D)cost analysis.
E)cost approximation.

Question 10

Volcano Hot Wings has budgeted the following costs for a month in which 12,000 wings will be cooked and sold. Each wing sells for $1.60 each.How much is the budgeted variable cost per unit?

A)$0.70
B)$0.90
C)$1.60
D)$0.80
E)None of these answer choices are correct.

Question 11

When the engineering method is applied to costs other than labor, it is referred to as the experience method.

Question 12

Mismatched time periods are not issues in the collection of data for cost estimation.

Question 13

A forecast of a cost at a particular level of activity is known as:

A)cost estimation.
B)cost prediction.
C)cost behavior.
D)cost analysis.
E)cost approximation.

Question 14

If the organization operates at an activity level outside the relevant range, any cost predictions based on data from the relevant range may not be very accurate.

Question 15

The least-squares regression method of cost estimation relies on only two data points.

Question 16

Volcano Hot Wings has budgeted the following costs for a month in which 12,000 wings will be cooked and sold. Each wing sells for $1.60 each.What is the budgeted total variable cost?

A)$10,800
B)$10,400
C)$9,500
D)$8,400
E)None of these answer choices is correct.

Question 17

A committed cost results from a management decision to spend a particular amount of money for some purpose.

Question 18

The slope of a regression line measures how steeply the cost line rises as activity increases.

Question 19

In regression analysis, the variable that is being predicted is known as the independent variable.

Question 20

In the least-squares regression method, the cost line is estimated so as to maximize the sum of the squared deviations between the cost line and the data points.

Question 21

During 20x5, Medallion Industries anticipates production of 20,000 units, budgeted variable costs of $85,000, and budgeted fixed costs of $45,000.If 15,000 units are actually produced, what is the expected total cost?

A)$130,000
B)$97,500
C)$108,750
D)$118,750
E)None of these answer choices is correct.

Question 22

Polka King Gifts had the following costs in March when 400 ceramic statues were produced: materials, $4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500.Which one of the following is the correct cost for Polka King?

A)The fixed cost per unit is $3.75
B)The variable cost per unit is $14.50
C)The fixed cost per unit is $19.50
D)The total cost per unit is $14.50
E)None of these answer choices is correct.

Question 23

Polka King Gifts had the following costs in March when 400 ceramic statues were produced: materials, $4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500.If production changes to 500 units and production still remains within the relevant range, which of the following costs will stay the same?

A)Variable cost per unit
B)Fixed cost per unit
C)Total variable cost
D)Total cost per unit
E)None of these answer choices is correct.

Question 24

Grimaldi Chocolates projects its factory rent to be $8,000 in July when 4,000 pounds of candy are expected to be produced.If rent is a fixed cost, and if production is expected to increase to 6,000 units in August, what is the expected cost of rent in August?

A)$12,000
B)$8,000
C)$7,000
D)$10,667
E)Not enough information is provided to determine the answer.

Question 25

Volcano Hot Wings has budgeted the following costs for a month in which 12,000 wings will be cooked and sold. Each wing sells for $1.60 each.What is Volcano Hot Wings' budgeted profit?

A)$19,200
B)$13,200
C)$8,400
D)$10,800
E)None of these answer choices is correct.

Question 26

Which of the following costs changes in direct proportion to a change in the activity level?

A)Variable cost.
B)Fixed cost.
C)Semivariable cost.
D)Step-variable cost.
E)Step-fixed cost.

Question 27

At Medallion Industries, during 20x5 the anticipated production is 5,000 units, budgeted variable costs are $75,000, and budgeted fixed costs are $24,000.If 5,600 units are actually produced, what is the expected total cost?

A)$110,600
B)$84,000
C)$108,000
D)$88,394
E)None of these answer choices is correct.

Question 28

Volcano Hot Wings has budgeted the following costs for a month in which 12,000 wings will be cooked and sold. Each wing sells for $1.60 each.How much would Volcano Hot Wings' profit increase if 100 more wings were sold?

A)$160.00
B)$70.00
C)$90.00
D)$168.00
E)None of these answer choices are correct.

Question 29

Command Generators is in the process of preparing a production cost budget for August.Actual costs in July for the production of 60 generators were: Materials and labor are the only variable costs.If production and sales are budgeted to increase to 70 generators in August, how much is the expected total variable cost on the August budget?

A)$17,850
B)$16,600
C)$9,100
D)$15,300
E)None of these answer choices is correct.

Question 30

What type of cost exhibits the behavior shown below?

A)Variable cost.
B)Fixed cost.
C)Semivariable cost.
D)Discretionary fixed cost.
E)Step-fixed cost.

Question 31

Command Generators is in the process of preparing a production cost budget for August.Actual costs in July for the production of 60 generators were: Materials and labor are the only variable costs.If production and sales are budgeted to increase to 70 generators in August, how much is the expected total cost on the August budget?

A)$17,850
B)$16,600
C)$9,100
D)$15,300
E)None of these answer choices is correct.

Question 32

Paige Corporation observed that when 25,000 units were sold, a particular cost amounted to $75,000, or $3.00 per unit.When volume increased by 10%, the cost totaled $82,500 (i.e., $3.00 per unit).The cost that Paige is studying can best be described as a:

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

Question 33

Fractured Auto Repair projects variable labor costs of $21,500 in March when 8,600 units are produced.If production is expected to drop to 8,000 units in April, what is the expected labor cost in April?

A)$21,500
B)$20,000
C)$23,113
D)$20,900
E)None of these answer choices is correct.

Question 34

Volcano Hot Wings has budgeted the following costs for a month in which 12,000 wings will be cooked and sold. Each wing sells for $1.60 each.What is the budgeted total fixed cost?

A)$7,300
B)$2,400
C)$8,400
D)$10,800
E)None of these answer choices is correct.

Question 35

Brawny Generators is in the process of preparing a production cost budget for August.Actual costs in July for the production of 60 generators were: Materials and labor are the only variable costs.If production and sales are budgeted to increase to 70 generators in August, how much is the expected total fixed cost on the August budget?

A)$8,750
B)$7,800
C)$7,500
D)$15,300
E)None of these answer choices is correct.

Question 36

Macon Company has a variable selling cost.If sales volume increases, how will the total variable cost and the variable cost per unit behave?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 37

Brawny Generators is in the process of preparing a production cost budget for August.Actual costs in July for the production of 60 generators were: Materials and labor are the only variable costs.If production and sales are budgeted to increase to 70 generators in August, how much is the fixed cost per unit on the August budget?

A)$107.14
B)$125.00
C)$218.57
D)$130.00
E)None of these answer choices is correct.

Question 38

Polka King Gifts had the following costs in March when 400 ceramic statues were produced: materials, $4,200; hourly labor, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500.If the production level changes to 500 units, how much will the total costs be?

A)$9,750
B)$7,800
C)$9,250
D)$1,950
E)None of these answer choices is correct.

Question 39

At Medallion Industries, variable cost per unit is budgeted to be $8.00 and fixed cost per unit is budgeted to be $5.00 in a period when 4,000 units are produced.What is the expected total cost of the units produced at Medallion, if instead, production is actually 5,100 units?

A)$52,000
B)$60,800
C)$66,300
D)$40,800
E)None of these answer choices is correct.

Question 40

Volcano Hot Wings has budgeted the following costs for a month in which 12,000 wings will be cooked and sold. Each wing sells for $1.60 each.What is the budgeted fixed cost per unit?

A)$0.70
B)$1.60
C)$0.20
D)$0.34
E)None of these answer choices is correct.

Question 41

If the Malabar Yacht Club expense includes a rent of $2,000 plus a charge of $40 per member and the club has 80 members,

A)fixed costs amount to $2,000 and variable costs amount to $3,200.
B)fixed costs amount to $3,200 and variable costs amount to $2,000.
C)all costs are fixed.
D)all costs are variable.
E)cannot be determined.

Question 42

A mixed cost is also known as a:

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

Question 43

A company observed a decrease in the cost per unit.All other things being equal, which of the following is most likely true?

A)The company is studying a variable cost, and total volume has increased.
B)The company is studying a variable cost, and total volume has decreased.
C)The company is studying a fixed cost, and total volume has increased.
D)The company is studying a fixed cost, and total volume has decreased.
E)The company is studying a fixed cost, and total volume has remained constant.

Question 44

Which of the following choices denotes the typical cost behavior of advertising and sales commissions?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 45

A cost that has both a fixed and variable component is known as a:

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

Question 46

Norman Company pays a sales commission of 4% on each unit sold.If a graph is prepared, with the vertical axis representing per-unit cost and the horizontal axis representing units sold, how would a line that depicts sales commissions be drawn?

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 47

Ralston has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead, $165,000; fixed overhead, $250,000.If Ralston now revises its anticipated production slightly upward, it would expect:

A)total fixed overhead of $250,000 and a lower hourly rate for variable overhead.
B)total fixed overhead of $250,000 and the same hourly rate for variable overhead.
C)total fixed overhead of $250,000 and a higher hourly rate for variable overhead.
D)total variable overhead of less than $165,000 and a lower hourly rate for variable overhead.
E)total variable overhead of less than $165,000 and a higher hourly rate for variable overhead.

Question 48

Organize, Inc.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 totaled $11.On the basis of this information, how much cost would the firm anticipate at an activity level of 205,000 units?

A)$2,235,000.
B)$2,222,000.
C)$2,214,000.
D)$2,200,000.
E)None of the answers is correct.

Question 49

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

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

Question 50

Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are known as:

A)step-fixed costs.
B)step-variable costs.
C)semivariable costs.
D)curvilinear costs.
E)mixed costs.

Question 51

When graphed, a typical fixed cost appears as:

A)a horizontal line.
B)a vertical line.
C)a u-shaped line.
D)a diagonal line that slopes downward to the right.
E)a diagonal line that slopes upward to the right.

Question 52

Brock Morton has a fast-food franchise and must pay a franchise fee of $45,000 plus 4% of gross sales.In terms of cost behavior, the fee is known as a:

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

Question 53

When graphed, a typical variable cost appears as:

A)a horizontal line.
B)a vertical line.
C)a u-shaped line.
D)a diagonal line that slopes downward to the right.
E)a diagonal line that slopes upward to the right.

Question 54

A review of Parson Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed cost per unit amounted to $8 and $4, respectively.On the basis of this information, what amount of total cost would Parson anticipate at a volume of 85,000 units?

A)$1,020,000.
B)$1,040,000.
C)$1,060,000.
D)$1,080,000.
E)None of the answers is correct.

Question 55

Each of Boggart's production managers (annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth.Boggart's salary cost can best be described as a:

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

Question 56

What type of cost exhibits the behavior shown below?

A)Variable cost.
B)Fixed cost.
C)Semivariable cost.
D)Step-variable cost.
E)Mixed cost.

Question 57

Straight-line depreciation is a typical example of a:

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

Question 58

Sophie Corporation recently produced and sold 100,000 units.Fixed costs at this level of activity amounted to $50,000; variable costs were $100,000.How much cost would the company anticipate if during the next period it produced and sold 102,000 units?

A)$150,000.
B)$151,000.
C)$152,000.
D)$153,000.
E)None of the answers is correct.

Question 59

When graphed, a typical step-fixed cost appears as:

A)a horizontal line.
B)a vertical line.
C)a series of staggered horizontal lines with the steps moving upward to the right.
D)a diagonal line that slopes downward to the right.
E)a diagonal line that slopes upward to the right.

Question 60

Which of the following is (are) example(s) of a mixed cost? I.A building that is used for both manufacturing and sales activities. II.An employee's compensation, which consists of a flat salary plus a commission. III.Depreciation that relates to five different machines. IV.Maintenance cost that must be split between sales and administrative offices.

A)I only.
B)II only.
C)I and III.
D)I, III, and IV.
E)I, II, III, and IV.

Question 61

Within the relevant range, a curvilinear cost function can sometimes be graphed as a:

A)sloping straight line.
B)jagged line.
C)vertical straight line.
D)curved line.
E)horizontal straight line.

Question 62

Gentry Industries has the following information about maintenance costs in the past six months. How much would Gentry pay if maintenance machine hours are 550?

A)$9,600.
B)$5,150.
C)$4,900.
D)$5,100.
E)None of the answers is correct.

Question 63

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

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

Question 64

Which of the following statements about the visual-fit method is (are) true? I.The method results in the creation of a scatter diagram. II.The method is not totally objective because of the manner in which the cost line is determined. III.The method is especially helpful in the determination of outliers.

A)I only.
B)II only.
C)I and II.
D)I and III.
E)I, II, and III.

Question 65

Amounts spent for charitable contributions are an example of a(n):

A)committed fixed cost.
B)committed variable cost.
C)discretionary fixed cost.
D)discretionary variable cost.
E)engineered cost.

Question 66

The nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the:

A)least-squares regression method.
B)high-low method.
C)visual-fit method.
D)account analysis method.
E)multiple regression method.

Question 67

Property taxes are an example of a(n):

A)committed fixed cost.
B)committed variable cost.
C)discretionary fixed cost.
D)discretionary variable cost.
E)engineered cost.

Question 68

Which of the following choices correctly classifies a committed fixed cost and a discretionary fixed cost?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 69

The high-low method and least-squares regression are used by accountants to:

A)evaluate divisional managers for purposes of raises and promotions.
B)choose among alternative courses of action.
C)maximize output.
D)estimate costs.
E)control operations.

Question 70

Which of the following is not an example of a committed fixed cost?

A)Property taxes.
B)Depreciation on buildings.
C)Salaries of management personnel.
D)Outlays for advertising programs.
E)Equipment rental costs.

Question 71

Which type of fixed cost (1) tends to be more long-term in nature and (2) can be cut back more easily in bad economic times without doing serious harm to organizational goals and objectives?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 72

Committed fixed costs would include:

A)advertising.
B)research and development.
C)depreciation on buildings and equipment.
D)contributions to charitable organizations.
E)expenditures for direct labor.

Question 73

Which of the following techniques is not used to analyze cost behavior?

A)Least-squares regression.
B)High-low method.
C)Visual-fit method.
D)Linear programming.
E)Multiple regression.

Question 74

Gentry Industries has the following information about maintenance costs in the past six months. If the company uses the high-low method to analyze costs, Gentry's variable cost is:

A)$8.70
B)$1.60
C)$7.90
D)$6.00
E)None of the answers is correct.

Question 75

Which of the following would not typically be classified as a discretionary fixed cost?

A)Equipment depreciation.
B)Employee development (education) programs.
C)Advertising.
D)Outlays for research and development.
E)Charitable contributions.

Question 76

Within the relevant range of activity, costs:

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.

Question 77

Gentry Industries has the following information about maintenance costs in the past six months. Gentry's monthly fixed maintenance fee is:

A)$1,600.
B)$1,200.
C)$3,600.
D)$112.
E)None of the answers is correct.

Question 78

The relevant range is that range of activity:

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

Question 79

Costs that result from a company's ownership or use of facilities and its basic organizational structure are known as:

A)discretionary fixed costs.
B)committed fixed costs.
C)discretionary variable costs.
D)committed variable costs.
E)engineered costs.

Question 80

Which of the following methods of cost estimation relies on only two data points?

A)Least-squares regression.
B)The high-low method.
C)The visual-fit method.
D)Account analysis.
E)Multiple regression.