Question 1

Selecting a volume- related cost driver and classifying each account as a variable cost or a fixed cost is called:

Accepted Answer

Account analysis involves selecting a cost driver and classifying costs as either variable or fixed based on the nature of the accounts.

Question 2

In a mixed- cost function, the intercept is:

Accepted Answer

The intercept in a mixed-cost function represents the fixed cost, which is the portion of the cost that does not change with the level of activity.

Question 3

A measurement of how much of the fluctuation of a cost is explained by changes in the cost driver is:

Accepted Answer

The coefficient of determination measures how well the changes in the cost driver explain the fluctuations in the cost, indicating the proportion of variance in the dependent variable predictable from the independent variable.

Question 4

of approximating cost functions does not involve the analysis of past costs.

Accepted Answer

Engineering analysis involves evaluating the technical aspects and specifications of a process to estimate costs, rather than relying on historical cost data.

Question 5

In the high- low method, the change in total cost is due to:

Accepted Answer

The high-low method calculates the variable cost per unit by analyzing the change in total cost relative to the change in activity level, assuming that the change is due to variable costs.

Question 6

Which statement regarding committed and discretionary fixed costs is true?

Accepted Answer

Discretionary fixed costs can be adjusted or eliminated in the short term, preserving management's flexibility, unlike committed fixed costs, which are long-term and harder to change.

Question 7

A lump sum amount of research and development planned for Senko Corporation would most likely be identified as a:

Accepted Answer

Discretionary fixed costs are costs that can be altered in the short term by current managerial decisions, such as research and development expenses.

Question 8

The method of measuring cost functions is the most subjective.

Accepted Answer

Account analysis is the most subjective method as it relies on the judgment and experience of the accountant to classify costs as fixed or variable.

Question 9

Engineering analysis and account analysis are similar because:

Accepted Answer

Both engineering analysis and account analysis require the subjective judgment of the analyst to interpret data and make decisions.

Question 10

The cost of using the telephone, which involves a flat rate per month plus a fee for extra usage, would be considered a:

Accepted Answer

A mixed cost includes both a fixed component (the flat rate per month) and a variable component (the fee for extra usage).

Question 11

A cost function for a mixed cost includes:

Accepted Answer

A mixed cost function includes both fixed and variable components, not the options listed.

Question 12

The following data has been assembled for Groundhog Company. Use the high- low method. $$\begin{array} { l l } 
\text { Cost } & \text { Hours } \
\$ 24,400 & 2,000 \
39,000 & 3,600 \
37,280 & 3,450 \
36,400 & 3,000 \
44,160 & 3,900
\end{array}$$ The variable cost per hour is:

Accepted Answer

The answer of The following data has been assembled for...

Question 13

Nicklaus, Inc., currently produces 110,000 units at a cost of $440,000. Next year Nicklaus, Inc., expects to produce 120,000 units. Nicklaus' relevant range is 100,000 to 120,000 units. If the cost is variable and 120,000 units are produced, the cost:

Accepted Answer

Variable costs change in direct proportion to the level of production. Since the cost for 110,000 units is $440,000, the cost per unit is $4. If production increases to 120,000 units, the total cost will increase to 120,000 units x $4/unit = $480,000.

Question 14

is a method of approximating cost functions.

Accepted Answer

The answer of is a method of approximating cost functions.
...

Question 15

Palmer, Inc., currently produces 140,000 units at a cost of $440,000. Next year Palmer, Inc., expects to produce 150,000 units. Palmer's relevant range is 100,000 to 150,000 units. If the cost is fixed and 150,000 units are produced, the fixed cost:

Accepted Answer

Fixed costs remain constant within the relevant range, so producing 150,000 units will not change the fixed cost of $440,000.

Question 16

The Brady Corporation used regression analysis to predict the annual cost of indirect materials. The results were as follows: Indirect M aterials Cost
Explained by Units Produced
$\begin{array}{cc}
\text { Constant } & \$ 21,885 \
\text { Standard error of Y estimate } & \$ 4,560 \
\text { R - s quared } & 0.4932 \
\text { No. of ob servations } & 22 \
\text { Degrees of freedom } & 20\X \text { coefficient }(s) & 3.75 \
\text { Standard error of coefficient(s) } & 8.1876
\end{array}$ the coefficient of deterinationis:

Accepted Answer

The coefficient of determination, also known as R-squared, is 0.4932.

Question 17

Insomniac Hotel's cost function based on guest- days of occupancy for custodial cost is given as: Y = $50,000 + $10.00X. Insomniac Hotel expects an occupancy level of 12,000 guest days. Insomniac Hotel's expected total cost is:

Accepted Answer

The total cost is calculated by substituting the expected occupancy level into the cost function: Y = $50,000 + $10.00(12,000) = $50,000 + $120,000 = $170,000.

Question 18

Account analysis:

Accepted Answer

Account analysis requires judgment by the analyst to determine which cost accounts and cost drivers are relevant.

Question 19

A cost function:

Accepted Answer

A cost function should be a reliable predictor of future costs as it helps in budgeting and planning by estimating how costs will change with different levels of activity.

Question 20

The method of measuring cost functions is the least reliable.

Accepted Answer

The answer of The method of measuring cost functions is...

Quiz 3: Measurement of Cost Behavior