Question 1

Knowledge about relationships between costs and cost drivers is useful for managers to ________.

Accepted Answer

Knowledge about relationships between costs and cost drivers is useful for managers to plan controls, provide feedback to managers and make decisions about the most efficient use of resources. Therefore, option D is the correct answer.

Question 2

The cost of using the telephone,which involves a flat rate per month plus a fee for every local and long-distance call would be a ________ cost.

Accepted Answer

The cost of using the telephone involves both a flat rate per month (which is a fixed cost) and a fee for every local and long-distance call (which is a variable cost). Therefore, it is a mixed cost.

Question 3

It may be difficult to trace costs to products or services if the costs are ________.

Accepted Answer

If costs are affected by multiple cost drivers, it can be difficult to isolate which specific cost driver is responsible for the cost of a product or service. This can make it challenging to trace costs accurately. Option A and B are not strong reasons that would affect cost tracing. Option D does not provide any explanation.

Question 4

The following three data points are available.This is an example of a ________ cost.

Accepted Answer

The answer of The following three data points are available.This...

Question 5

A company rents a machine to be used in operations.The rental agreement calls for a flat rent payment of $2,000 per month plus $0.10 for each hour the machine is used.This is an example of a ________.

Accepted Answer

This is an example of mixed cost because it has both fixed and variable components. The flat rent payment of $2,000 per month is a fixed cost, while the additional $0.10 for each hour the machine is used is a variable cost.

Question 6

Understanding the relationship between costs and their cost drivers allows managers in all types of organizations to make proper short-run marketing decisions.

Accepted Answer

Understanding the relationship between costs and their cost drivers allows managers to determine the most cost-effective ways to allocate resources and make informed decisions about pricing, production, and marketing strategies in the short run. This helps organizations to maximize profits and achieve their objectives.

Question 7

Many organizations use a linear relationship with a single cost driver to describe a cost even though the cost may have multiple cost drivers.Why?

Accepted Answer

Using a linear relationship with a single cost driver is easier and less expensive to implement than developing a complex function, and for many decisions, the estimates from the simple function are accurate enough. The cost of developing a more complex function may not outweigh the benefits, especially for small to medium-sized organizations. Therefore, all of the above reasons contribute to why organizations use a single cost driver to describe a cost.

Question 8

Measurement of cost behavior means understanding and quantifying how activities of an organization affect its level of costs.

Accepted Answer

Measurement of cost behavior involves identifying how costs change in response to changes in an organization's activities. This process helps in understanding and predicting the level of costs associated with a particular activity or operation of the organization.

Question 9

Which is NOT a step cost?

Accepted Answer

A step cost is a fixed cost that increases or decreases only when production, sales, or some other activity reaches a certain threshold. In option D, the cost of wages for maintenance workers don't increase or decrease only when production, sales, or some other activity reaches a certain threshold, but it is in direct proportion to the amount of production. Therefore, it is not a step cost. Options A, B and C are all examples of step cost.

Question 10

Palmer Inc.currently produces 110,000 units at a cost of $440,000.The cost is variable.Next year Palmer Inc.expects to produce 115,000 units.Palmer's relevant range for production is 100,000 to 120,000 units.If 115,000 units are produced next year,what is the expected variable cost?

Accepted Answer

The cost is variable, meaning it changes with the level of production. The cost per unit is $440,000 / 110,000 units = $4 per unit. For 115,000 units, the cost would be 115,000 units * $4/unit = $460,000.

Question 11

Which of the following statements about step costs is FALSE?

Accepted Answer

Step costs are not the same as mixed costs. Mixed costs have both a fixed and variable component, whereas step costs are only fixed over a certain range of activity and then increase when that range is exceeded.

Question 12

________ contain elements of both fixed and variable cost behavior.

Accepted Answer

Mixed costs contain both fixed and variable cost components. The fixed cost component remains constant, while the variable cost component varies with the level of activity.

Question 13

Costs that change abruptly at different levels of activity because the resources and their costs come in indivisible chunks are called ________.

Accepted Answer

Step costs are a type of cost that changes abruptly at different levels of activity because the resources and their costs come in indivisible chunks. These costs are fixed within a certain range of activity but then increase in steps when activity exceeds certain thresholds. For example, the cost of a production supervisor may be a step cost if an additional supervisor must be hired to handle an increase in production beyond a certain level.

Question 14

Volume-driven costs can be easily traced to products or services.

Accepted Answer

Volume-driven costs are costs that are directly related to the level of production or sales volume, such as materials, labor, and utilities. As these costs increase or decrease with the level of production or sales, they can be easily attributed to specific products or services.

Question 15

A compensation plan where the sales force is paid salary plus commission is a ________.

Accepted Answer

A compensation plan that includes both salary and commission is a mixed cost, as it includes both fixed and variable components. The salary is a fixed cost, while the commission is a variable cost that is based on the level of sales achieved by the sales force.

Question 16

Knowledge about the relationship between costs and cost drivers helps managers ________.

Accepted Answer

Understanding the relationship between costs and cost drivers helps managers make short-term decisions to control costs, plan for the effects of future activities, and make long-term decisions about investments and strategy. Thus, all of the above choices are correct.

Question 17

A car lease payment is computed based solely on the number of miles driven.This is an example of a ________.

Accepted Answer

A purely variable cost is a cost that varies in direct proportion to changes in an activity or driver. In this case, the car lease payment varies depending on the number of miles driven, which is a clear example of a purely variable cost.

Question 18

In a small construction firm,a crew supervisor is added for every ten workers employed.The salaries of the crew supervisors are a ________.

Accepted Answer

The salary of the crew supervisors is a step cost because it increases each time the number of employees increases by 10, rather than increasing in a continuous manner.

Question 19

Snead currently produces 120,000 units at a cost of $400,000.Of the $400,000 cost,$200,000 is a fixed cost.Next year Snead expects to produce 145,000 units.Snead's relevant range for production activities is 100,000 to 150,000 units.If 145,000 units are produced next year,what is the expected fixed cost for next year?

Accepted Answer

The fixed cost remains constant within the relevant range of production, so it will still be $200,000 next year.

Question 20

Salaries of the telemarketers are set at $10,000 per month.The telemarketers also receive a commission for each donation they receive.They receive $5 per donation.The telemarketers salaries' and commission is a ________ cost.

Accepted Answer

The telemarketers' salaries consist of a fixed component of $10,000 per month, which is not affected by the number of donations received. However, the commission they receive for each donation is a variable cost, as it fluctuates depending on the number of donations received. Therefore, the overall cost incurred by the company for the telemarketers' salaries and commission is a mixed cost, consisting of both fixed and variable components.

Quiz 3: Measurement of Cost Behavior