cost-acct-test-bank-chapter-10

1Copyright©2012PearsonEducation,Inc.CostAccounting,14e(Horngren/Datar/Rajan)Chapter10DeterminingHowCostsBehaveObjective10.11)WhichofthefollowingstatementsrelatedtoassumptionsaboutestimatinglinearcostfunctionsisFALSE?A)Variationsinasinglecostdriverexplainvariationsintotalcosts.B)Acostobjectisanythingforwhichaseparatemeasurementofcostsisdesired.C)Alinearfunctionapproximatescostbehaviorwithintherelevantrangeofthecostdriver.D)Ahighcorrelationbetweentwovariablesensuresthatacause-and-effectrelationshipexists.Answer:DDiff:2Terms:costestimation,linearcostfunctionObjective:1AACSB:Reflectivethinking2)Ahighcorrelationbetweentwovariablessandtindicatesthat:A)smaycauset,ortmaycausesB)bothmaybeaffectedbyathirdvariableC)thecorrelationmaybeduetorandomchanceD)Alloftheseanswersarecorrect.Answer:DDiff:2Terms:costfunctionObjective:1AACSB:Reflectivethinking3)WhichofthefollowingdoesNOTrepresentacause-and-effectrelationship?A)Materialcostsincreaseasthenumberofunitsproducedincreases.B)Acompanyischarged40centsforeachbrochureprintedandmailed.C)Utilitycostsincreaseatthesametimethatinsurancecostsincrease.D)Itmakessensethatifacomplexproducthasalargenumberofpartsitwilltakelongertoassemblethanasimpleproductwithfewerparts.Answer:CDiff:3Terms:costfunctionObjective:1AACSB:Reflectivethinking2Copyright©2012PearsonEducation,Inc.4)BennetCompanyemploys30individuals.Eighteenemployeesarepaid$14perhourandtherestaresalariedemployeespaid$4,000amonth.Howwouldtotalcostsofpersonnelbeclassified?A)variableB)mixedC)avariablecostwithinarelevantrangeD)afixedcostwithinarelevantrangeAnswer:BDiff:2Terms:mixedcostObjective:1AACSB:Analyticalskills5)McGuinnessCompanyemploys8individuals.Theyareallpaid$14.50perhour.Howwouldtotalcostsofpersonnelbeclassified?A)variableB)mixedC)avariablecostwithinarelevantrangeD)afixedcostwithinarelevantrangeAnswer:ADiff:2Terms:variablecostObjective:1AACSB:Analyticalskills6)ForFebruary,thecostcomponentsofapictureframeinclude$0.25fortheglass,$.65forthewoodenframe,and$0.80forassembly.Theassemblydeskandtoolscost$400.1,000framesareexpectedtobeproducedinthecomingyear.Whatcostfunctionbestrepresentsthesecosts?A)y=1.70+400XB)y=400+1.70XC)y=2.10+1,000XD)y=.90+400XAnswer:BDiff:2Terms:linearcostfunctionObjective:1AACSB:Analyticalskills7)Thecostcomponentsofaheaterinclude$35forthecompressor,$12forthesheetmoldedcompoundframe,and$80perunitforassembly.Thefactorymachinesandtoolscostis$55,000.Thecompanyexpectstoproduce1,500heatersinthecomingyear.Whatcostfunctionbestrepresentsthesecosts?A)y=1,500+127XB)y=1,500+55,000XC)y=55,000+1,500XD)y=55,000+127XAnswer:DDiff:2Terms:linearcostfunctionObjective:1AACSB:Analyticalskills3Copyright©2012PearsonEducation,Inc.8)Alinearcostfunctioncanrepresent:A)mixedcostbehaviorsB)fixedcostbehaviorsC)variablecostbehaviorsD)Alloftheseanswersarecorrect.Answer:DDiff:2Terms:linearcostfunctionObjective:1AACSB:Reflectivethinking9)Thecostfunctiony=2,000+6X:A)hasaslopecoefficientof2,000B)hasaninterceptof6C)isastraightlineD)representsafixedcostAnswer:CDiff:2Terms:linearcostfunctionObjective:1AACSB:Analyticalskills10)Thecostfunctiony=150+10X:A)hasaslopecoefficientof150B)hasaninterceptof150C)isanonlinearD)representsafixedcostAnswer:BDiff:2Terms:linearcostfunctionObjective:1AACSB:Analyticalskills11)Thecostfunctiony=10,000+3X:A)representsamixedcostB)willintersectthey-axisat3C)hasaslopecoefficientof10,000D)isacurvedlineAnswer:ADiff:2Terms:linearcostfunctionObjective:1AACSB:Analyticalskills4Copyright©2012PearsonEducation,Inc.12)Thecostfunctiony=90+8X:A)hasaslopecoefficientof-8B)willintersectthey-axisat8C)hasaslopecoefficientof8D)isacurvedlineAnswer:CDiff:2Terms:linearcostfunctionObjective:1AACSB:Analyticalskills13)Whichofthefollowingisanequationofafixedcostfunction?A)y=bX+aB)y=a+bXC)y=bXD)y=aAnswer:DDiff:2Terms:linearcostfunctionObjective:1AACSB:Analyticalskills14)Oneassumptionfrequentlymadeincostbehaviorestimationisthatchangesintotalcostscanbeexplainedbychangesinthelevelofasingleactivity.Answer:TRUEDiff:1Terms:costestimationObjective:1AACSB:Analyticalskills15)Acostfunctionisamathematicaldescriptionofhowacostchangeswithchangesinthelevelofanactivityrelatingtothatcost.Answer:TRUEDiff:1Terms:costfunctionObjective:1AACSB:Reflectivethinking16)Allcostfunctionsarelinear.Answer:FALSEExplanation:Allcostfunctionsarenotlinear,butforcost-behaviorestimationweassumesomearelinearwithinarelevantrange.Diff:1Terms:costfunctionObjective:1AACSB:Reflectivethinking5Copyright©2012PearsonEducation,Inc.17)Whenplottedonagraph,costfunctionsareusuallydisplayedbyhavingthelevelofactivity(machinehours,etc.)plottedonthehorizontalaxis(calledthex-axis)andtheamountoftotalcostscorrespondingto(ordependenton)thelevelsofthatactivityontheverticalaxis(calledthey-axis).Answer:TRUEDiff:1Terms:costfunctionObjective:1AACSB:Reflectivethinking18)Whenestimatingacostfunction,costbehaviorcanbeapproximatedbyalinearcostfunctionwithintherelevantrange.Answer:TRUEDiff:2Terms:costestimation,costfunctionObjective:1AACSB:Reflectivethinking19)y=a+bXrepresentsthegeneralformofthelinearcostfunction.whic