Question 1

The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year. What is the unused capacity in dollars?
A)$60,000
B)$30,000
C)$240,000
D)$15,000

Accepted Answer

Each engineer can process 1,500 design changes, so the total capacity of the four engineers is 6,000 design changes. Last year, only 5,250 design changes were produced, meaning that there is unused capacity of 750 design changes. Each engineer is paid $60,000 per year, so the unused capacity in dollars is 750 x $60,000 / 6,000 = $7,500. Since this is the unused capacity for all four engineers, the total unused capacity is $7,500 x 4 = $30,000. Therefore, the best choice is (B).

Question 2

A company usually processes 20,000 orders at a total cost of $300,000. During the year, only 16,000 orders were processed. What is the cost of resource usage?
A)$300,000
B)$240,000
C)$30,000
D)$60,000

Accepted Answer

The cost of resource usage is directly proportional to the number of orders processed. Since only 16,000 orders were processed during the year, the cost of resource usage would be less than the total cost of $300,000 which is incurred for processing 20,000 orders. To find out the cost of resource usage, we can use the concept of proportionality as follows:
Cost of resource usage / Number of orders processed = Total cost / Total number of orders
Cost of resource usage / 16,000 = $300,000 / 20,000
Cost of resource usage = ($300,000 / 20,000) * 16,000
Cost of resource usage = $240,000
Therefore, the cost of resource usage is $240,000 which is the best choice as given in option B.

Question 3

Violet Company has five process engineers, and each of them can process 2,500 design changes. Last year 5,000 design changes were processed by the five engineers. Each engineer is paid $50,000 per year. Calculate the unused capacity.
A)7,500 change orders
B)3,500 change orders
C)4,500 change orders
D)6,500 change orders

Accepted Answer

Each engineer can process 2,500 design changes, so five engineers can process a total of 12,500 changes (2,500 changes/engineer * 5 engineers). Last year, they processed 5,000 changes, so the unused capacity is 12,500 - 5,000 = 7,500 change orders.

Question 4

A nursing home requires one nurse for each six patients. This is an example of a
A)fixed cost.
B)variable cost.
C)step cost.
D)mixed cost.

Accepted Answer

This is an example of a step cost because the cost increases in steps as the number of patients increases, requiring additional nurses at specific intervals (every six patients).

Question 5

Which of the following decision-making tools would NOT be useful in determining the slope and intercept of a mixed cost?
A)scattergraphs
B)least-squares method
C)high-low method
D)account analysis method

Accepted Answer

The account analysis method is not useful in determining the slope and intercept of a mixed cost as it is a subjective method that relies on the accountant's judgment rather than an objective mathematical formula. The other three methods listed are all quantitative methods that can be used to determine the slope and intercept of a mixed cost.

Question 6

The _____ is used to estimate costs by classifying accounts in the general ledger as fixed, variable, or mixed.
A)account analysis method
B)multiple regression method
C)coefficient of correlation method
D)least cost method

Accepted Answer

The account analysis method is the one that is used to estimate costs by classifying accounts in the general ledger as either fixed, variable, or mixed. The multiple regression method and the coefficient of correlation method are statistical tools for estimating costs, and the least cost method is a technique used in operations research for optimizing production processes.

Question 7

The activity-based resource usage model allows managers to better calculate the changes in resource supply and demand resulting from decisions such as:
A)to make or buy production components.
B)maximization of individual unit performance.
C)increasing the allocation of costs.
D)focusing on managing costs rather than activities.

Accepted Answer

The activity-based resource usage model helps managers to calculate changes in resource supply and demand which can aid in making decisions regarding whether to make or buy production components. It is, therefore, the best choice out of the given options. Maximization of individual unit performance is not directly related to calculating changes in resource supply and demand. Increasing the allocation of costs and managing costs rather than activities are not specific decisions that can be aided by the activity-based resource usage model.

Question 8

Which of the following methods of determining cost behavior uses time and motion studies?
A)The cost separation method
B)The industrial engineering method
C)The quantitative analysis method
D)The scatterplot method

Accepted Answer

The industrial engineering method uses time and motion studies to determine cost behavior, by identifying the cost drivers that affect the time and resources required to perform a task. This method is commonly used in manufacturing environments where production processes can be observed and analyzed. The other methods listed do not use time and motion studies to determine cost behavior.

Question 9

Which of the following is an example of a step-fixed cost?
A)cost of disposable gowns used by patients in a hospital
B)cost of soaking solution to clean jewelry (Each jar can soak 50 rings before losing effectiveness.)
C)cost of tuition at $300 per credit hour up to 15 credit hours (Hours taken in excess of 15 hours are free.)
D)cost of disposable surgical scissors, which are purchased in increments of 100

Accepted Answer

Step-fixed costs are fixed costs that remain constant within a certain range of output but increase by a lump sum once output reaches a certain level. In the case of disposable surgical scissors, the cost remains constant until a certain threshold is reached, at which point the cost increases by the lump sum of purchasing an additional increment of 100 scissors.

Question 10

A company usually processes 20,000 orders at a total cost of $250,000. During the year, only 10,000 orders were processed. What is the cost of unused activity?
A)$200,000
B)$240,000
C)$150,000
D)$125,000

Accepted Answer

The cost of unused activity can be calculated by first determining the cost per order when the company operates at its usual level, which is $250,000 / 20,000 orders = $12.50 per order. When the company processes only 10,000 orders, the expected cost at the usual rate would be 10,000 orders * $12.50 = $125,000. Since the company was prepared to spend $250,000 but only needed $125,000 for the 10,000 orders, the cost of unused activity is $250,000 - $125,000 = $125,000.

Question 11

Which of the following is an example of a committed fixed expense?
A)depreciation on a factory building
B)supervisor's salary
C)direct labor
D)insurance on a building

Accepted Answer

Depreciation on a factory building is a committed fixed expense as it is a long-term, unavoidable cost that does not change with production levels.

Question 12

Which of the following is an example of a discretionary fixed expense?
A)contract workers
B)property taxes on a factory building
C)depreciation on a factory building
D)insurance on a building

Accepted Answer

Contract workers are an example of a discretionary fixed expense because they are not essential to the operation of the business and can be eliminated if necessary.

Question 13

Which of the following methods of determining cost behavior uses average account values and average driver values to calculate fixed costs and variable rates?
A)The industrial value costing method
B)The account analysis method
C)The learning average curve model
D)The confidence interval driver model

Accepted Answer

The account analysis method calculates fixed costs and variable rates by analyzing past account values and identifying the driver that best explains the cost behavior. It uses average account values and average driver values as inputs. The other methods mentioned (industrial value costing method, learning average curve model, and confidence interval driver model) are not commonly used for determining cost behavior.

Question 14

The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year. Calculate the activity rate per change order.
A)$4 per change order
B)$10 per change order
C)$40 per change order
D)$15 per change order

Accepted Answer

The activity rate per change order can be calculated as the total cost of the process divided by the total number of change orders.
Total cost for the four process engineers = 4 x $60,000 = $240,000
Number of change orders produced = 5,250
Activity rate per change order = $240,000 / 5,250 = $45.71
Rounding up to the nearest dollar, the activity rate per change order is $46. Therefore, the closest answer is C, $40 per change order.

Question 15

The expenses that result when organizations acquire many multiperiod service capacities by paying cash up front or by entering into an explicit contract that requires periodic cash payments are called:
A)Managed fixed expenses
B)Committed fixed expenses
C)Discretionary fixed expenses
D)Period expenses

Accepted Answer

Committed fixed expenses are those expenses that result when organizations acquire many multiperiod service capacities by paying cash up front or by entering into an explicit contract that requires periodic cash payments. These expenses are fixed in nature and cannot be easily adjusted in the short term. Examples include rent, insurance premiums, and payments on long-term leases.

Question 16

The type of resources that are acquired from outside sources, where the terms of acquisition do NOT require any long-term commitment for any given amount of the resource are called:
A)Flexible resources
B)Committed resources
C)Discretionary fixed expenses
D)Committed fixed expenses

Accepted Answer

Flexible resources are those that can be acquired from outside sources without any long-term commitment for a specific amount of the resource. These resources can be adjusted as needed, making them a more flexible option for organizations compared to committed resources, which require a long-term commitment for a specific amount.

Question 17

The annual expenses associated with the multi-period category is independent of actual usage of the resource and are referred to as:
A)variable costs.
B)committed fixed expenses.
C)mixed costs.
D)overhead expenses.

Accepted Answer

Committed fixed expenses are those that are incurred regardless of the level of activity or usage of the resource. They are also known as "fixed costs" or "period costs." Variable costs, on the other hand, are directly proportional to the level of activity or usage of the resource. Mixed costs have both fixed and variable components, while overhead expenses are a broader term that encompasses various types of indirect costs incurred by a business.

Question 18

When a firm acquires the resources needed to perform an activity, it is obtaining
A)practical capacity.
B)resource usage.
C)activity capacity.
D)unused capacity.

Accepted Answer

When a firm acquires the resources needed to perform an activity, it is obtaining "activity capacity." This term refers to the amount of resources (such as labor, equipment, or materials) that a firm has secured to carry out a specific activity or set of activities. It essentially measures the potential output or the volume of work that can be performed with the resources available.

Question 19

Salaries paid to shift supervisors are an example of a
A)step-variable cost.
B)mixed cost.
C)step-fixed cost.
D)variable cost.

Accepted Answer

Shift supervisors' salaries are fixed costs that remain constant within a certain range of output or activity, but increase in a step-like manner when the activity level crosses a certain threshold (e.g. when more supervisors are needed to manage additional shifts). This makes them an example of step-fixed costs.

Question 20

The costs incurred for the acquisition of short-run activity capacity, usually as the result of yearly planning are called:
A)Discretionary fixed expenses
B)Committed fixed expenses
C)Mixed costs
D)Step-variable costs

Accepted Answer

Discretionary fixed expenses refer to costs incurred for the acquisition of short-run activity capacity, usually as the result of yearly planning. Committed fixed expenses refer to costs that are fixed in the short run and cannot be easily adjusted. Mixed costs refer to costs that have both a fixed and variable component. Step-variable costs refer to costs that increase in steps as activity levels increase.

Quiz 3: Cost Behavior

The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year. What is the unused capacity in dollars?

A company usually processes 20,000 orders at a total cost of $300,000. During the year, only 16,000 orders were processed. What is the cost of resource usage?

Violet Company has five process engineers, and each of them can process 2,500 design changes. Last year 5,000 design changes were processed by the five engineers. Each engineer is paid $50,000 per year. Calculate the unused capacity.

A nursing home requires one nurse for each six patients. This is an example of a

Which of the following decision-making tools would NOT be useful in determining the slope and intercept of a mixed cost?

The _____ is used to estimate costs by classifying accounts in the general ledger as fixed, variable, or mixed.

The activity-based resource usage model allows managers to better calculate the changes in resource supply and demand resulting from decisions such as:

Which of the following methods of determining cost behavior uses time and motion studies?

Which of the following is an example of a step-fixed cost?

A company usually processes 20,000 orders at a total cost of $250,000. During the year, only 10,000 orders were processed. What is the cost of unused activity?

Which of the following is an example of a committed fixed expense?

Which of the following is an example of a discretionary fixed expense?

Which of the following methods of determining cost behavior uses average account values and average driver values to calculate fixed costs and variable rates?

The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year. Calculate the activity rate per change order.

The expenses that result when organizations acquire many multiperiod service capacities by paying cash up front or by entering into an explicit contract that requires periodic cash payments are called:

The type of resources that are acquired from outside sources, where the terms of acquisition do NOT require any long-term commitment for any given amount of the resource are called:

The annual expenses associated with the multi-period category is independent of actual usage of the resource and are referred to as:

When a firm acquires the resources needed to perform an activity, it is obtaining

Salaries paid to shift supervisors are an example of a

The costs incurred for the acquisition of short-run activity capacity, usually as the result of yearly planning are called: