Question 1

A good example of a cost driver for production labor wages is the number of engineering hours worked.

Accepted Answer

The number of engineering hours worked is more likely a cost driver for engineering costs, not production labor wages. Production labor wages are typically driven by the number of production hours worked.

Question 2

To predict costs and manage them on a day-to-day basis,managers must identify:

Accepted Answer

To effectively predict and manage costs, managers must identify the cost of resources used, cost drivers, and key activities and resources used to perform those activities. By understanding each of these factors, managers can create more accurate cost estimates, plan budgets effectively, and make informed decisions about resource allocation. Therefore, all of the options listed (A, B, and C) are important for managers to consider when managing costs.

Question 3

To control costs,managers should focus their efforts on managing ________.

Accepted Answer

Managing the activities required to make, sell, and deliver products or services can help to control costs by identifying inefficiencies and streamlining processes. This approach focuses on reducing costs from the bottom up, rather than just managing revenues or production costs.

Question 4

As the sales volume increases in the relevant range,variable costs per unit ________ but total variable costs ________.

Accepted Answer

Variable costs per unit remain constant as they are incurred per unit of production, but total variable costs increase as more units are produced.

Question 5

A good example of a cost driver for production supervisor salaries is the number of people supervised.

Accepted Answer

The more people a production supervisor oversees, the more responsibility and workload they have, which justifies a higher salary. Therefore, the number of people supervised is a cost driver for production supervisor salaries.

Question 6

As sales volume increases in the relevant range,a fixed cost does not change ________,but the fixed cost ________ becomes progressively smaller.

Accepted Answer

Fixed costs remain constant in total regardless of sales volume, but the fixed cost per unit decreases as sales volume increases because the same total cost is spread over more units.

Question 7

Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane.What is an appropriate cost driver for the salary of the supervisor in charge of this activity?

Accepted Answer

The number of workers supervised is the most appropriate cost driver for the salary of the supervisor because the supervisor's responsibility is to manage and oversee the work done by the workers. The more workers the supervisor has to manage, the greater their responsibility and thus their salary should reflect this. The other options, such as A (mechanic hours) and B (engineering hours), relate more to the labor being performed rather than the supervision of that labor, and D (weight of seats installed) is not directly related to the supervisor's responsibilities.

Question 8

When analyzing costs,accountants should think of variable costs on a ________ basis and fixed costs on a ________ basis.

Accepted Answer

Variable costs are analyzed on a per-unit basis because they change with the level of production, while fixed costs are analyzed on a total basis as they remain constant regardless of production levels.

Question 9

Which of the following cost drivers would NOT be appropriate for the customer services activity of the value chain?

Accepted Answer

Engineering hours by research and development staff are not related to the customer services activity of the value chain. This cost driver would be more appropriate for the research and development activity. The other choices, such as number of service calls, hours spent servicing products, and number of service call workers, directly impact the cost of the customer services activity.

Question 10

Consider the following activity: Several product and process engineers are working to make improvements to several existing products.These improvements revolve around safety and durability issues.What is an appropriate cost driver for this activity?

Accepted Answer

The answer of Consider the following activity: Several product and...

Question 11

Which of the following costs is a variable cost?

Accepted Answer

Fuel cost for an airplane for an airline is a variable cost because the cost will increase or decrease depending on how much the airplane is being used. The other options are fixed costs because they do not change based on the level of production or usage.

Question 12

Which value chain function would use the following cost driver: number of advertisements?

Accepted Answer

The number of advertisements is a cost driver for the marketing function of the value chain. This function is responsible for promoting and raising awareness of the product or service through various marketing activities, including advertising.

Question 13

Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane.What is an appropriate cost driver for the labor resources used for this activity?

Accepted Answer

The appropriate cost driver for the labor resources used for the activity of installing seats in a commercial airplane would be the number of labor hours used for installation. This is because the cost of labor is directly proportional to the number of labor hours used for installation. The other options, such as service center hours, mechanic hours, and engineering hours, may not be directly related to the installation of seats and may not accurately represent the cost of labor for this specific activity.

Question 14

Cost drivers are ________.

Accepted Answer

Cost drivers are measures of activities that require the use of resources and thereby cause costs. They are used to identify the root causes of a firm's costs and help managers make informed decisions about how to manage cost effectively.

Question 15

Which of the following statements about costs is FALSE?

Accepted Answer

Managers cannot fully control costs without understanding how activities of an organization affect its costs. Identifying cost drivers and understanding the various activities of an organization's value chain are important factors in controlling costs. Thus, statement D is false.

Question 16

Several machines are used in the factory to manufacture a simple product.What is an appropriate cost driver for the depreciation expense on the machines?

Accepted Answer

Depreciation expense on machines is directly related to the number of machine hours used in production. Therefore, number of machine hours is an appropriate cost driver for this expense. A) number of advertisements and B) number of service calls are not related to the use of machines and D) number of hours spent servicing defective products relates to a separate expense category.

Question 17

Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane.What is an appropriate cost driver for the cost of the seats?

Accepted Answer

The number of seats installed is the most appropriate cost driver since the cost of the seats will directly be proportional to the number of seats installed. The number of labor hours, mechanic hours, and engineering hours may not accurately represent the cost of the seats since different seats may require different levels of expertise/time to install.

Question 18

As sales volume decreases in the relevant range,fixed costs per unit ________,but total fixed costs ________.

Accepted Answer

Fixed costs are expenses that do not change with changes in sales volume. As sales volume decreases, the same fixed costs are spread over fewer units, resulting in an increase in fixed costs per unit. However, total fixed costs remain the same as they do not change with changes in sales volume.

Question 19

Which value chain function would use the following cost driver: weight of items delivered?

Accepted Answer

The distribution function would use weight of items delivered as a cost driver since transportation costs (such as fuel, maintenance, and driver salaries) are often based on the weight of the goods being transported.

Question 20

A key factor in controlling costs is focusing on the revenues a product or service generates.

Accepted Answer

Controlling costs involves managing expenses and optimizing resource use, while focusing on revenues pertains to increasing income. Both are important but distinct aspects of financial management.

Quiz 2: Introduction to Cost Behavior and Cost-Volume Relationships