cost accounting test bank chapter 10.docx
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cost accounting test bank chapter 10.docx
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costaccountingtestbankchapter10
CostAccounting,15e(Horngren/Datar/Rajan)
Chapter10DeterminingHowCostsBehave
Objective10.1
1)Acostfunctionisa________.
A)processofcalculatingpresentvalueofprojectedcashflows
B)processofallocatingcoststocostcentersorcostobjects
C)mathematicaldescriptionofhowacostchangeswithchangesinthelevelofanactivityrelatingtothatcost
D)isaverythoroughanddetailedwaytoidentifyingacostobjectwhenthereisaphysicalrelationshipbetweeninputsandoutputs
Answer:
C
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
2)BennetCompanyemploys20individuals.Eighteenemployeesarepaid$18perhourandtherestaresalariedemployeespaid$3,000amonth.Whichofthefollowingisthetotalcostfunctionofpersonnel?
A)y=a+bX
B)y=b
C)y=bX
D)y=a
Answer:
A
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
3)CrimsonServices,Inc.,employs8individuals.Theyareallpaid$16.50perhour.Howwouldtotalcostsofpersonnelbeclassified?
A)variablecost
B)mixedcost
C)irrelevantcost
D)fixedcost
Answer:
A
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
4)ForFebruary,thecostcomponentsofapictureframeinclude$0.30fortheglass,$0.75forthewoodenframe,and$0.80forassembly.Theassemblydeskandtoolscost$500.Twohundredfiftyframesareexpectedtobeproducedinthecomingyear.Whatcostfunctionbestrepresentsthesecosts?
A)y=1.85+500X
B)y=500+1.85X
C)y=3.85+600X
D)y=1.05+500X
Answer:
B
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
5)Thecostcomponentsofaheaterinclude$30forthecompressor,$10forthesheetmoldedcompoundframe,and$75perunitforassembly.Thefactorymachinesandtoolscostis$60,000.Thecompanyexpectstoproduce1,000heatersinthecomingyear.Whatcostfunctionbestrepresentsthesecosts?
A)y=60,000+115X
B)y=1,000+60,000X
C)y=60,000+1,000X
D)y=1,000+115X
Answer:
A
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
6)Whichofthefollowingstatementsistrueofalinearcostfunction?
A)Itpresentsvariablecostasaslopecoefficient.
B)Itpresentstotalcostasanintercept.
C)Itpresentsvariablecostasanintercept.
D)Itpresentstotalcostasslopecoefficient.
Answer:
A
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
7)Afinancemanagerhastoselectoneofthefourdifferentsuppliersofrawmaterials.Thetotalcostfunctionsunderthefouroptionsaregivenbelow.Assumethequalityoftherawmaterialtobethesame,whichofthefollowingispreferredbythefinancemanager?
A)y=200+5X
B)y=200+5.50X
C)y=200+4.50X
D)y=200+4.70X
Answer:
C
Diff:
3
Objective:
1
AACSB:
Analyticalthinking
8)Ifthetotalcostfunctionisy=5,000+7X,calculatethevariablecostfor4,000units.
A)$33,000
B)$28,000
C)$20,000
D)$5,000
Answer:
B
Explanation:
B)Explanation:
Variablecostfor4,000units=$7×4,000units=$28,000
Diff:
2
Objective:
1
AACSB:
Applicationofknowledge
9)Thecostfunctiony=2,000+6X________.
A)hasaslopecoefficientof2,000
B)hasaninterceptof6
C)isastraightline
D)representsafixedcost
Answer:
C
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
10)Thecostfunctiony=150+10X________.
A)hasaslopecoefficientof150
B)hasaninterceptof150
C)isanonlinear
D)representsafixedcost
Answer:
B
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
11)Thecostfunctiony=10,000+3X________.
A)representsamixedcost
B)willintersectthey-axisat3
C)hasaslopecoefficientof10,000
D)isacurvedline
Answer:
A
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
12)Whichofthefollowingfunctionsrepresentstheleasttotalcostassumingthenumberofunitsisequalineachcase?
A)y=180+7X
B)y=90+6X
C)y=90+7X
D)y=180+6X
Answer:
B
Diff:
3
Objective:
1
AACSB:
Analyticalthinking
13)Whichofthefollowingisanequationofafixedcostfunction?
A)y=(a+b)X
B)y=a+bX
C)y=bX
D)y=a
Answer:
D
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
14)Oneassumptionfrequentlymadeincostbehaviorestimationisthatchangesintotalcostscanbeexplainedbychangesinthelevelofasingleactivity.
Answer:
TRUE
Diff:
1
Objective:
1
AACSB:
Analyticalthinking
15)Acostfunctionisamathematicaldescriptionofhowacostchangeswithchangesinthelevelofanactivityrelatingtothatcost.
Answer:
TRUE
Diff:
1
Objective:
1
AACSB:
Analyticalthinking
16)Allcostfunctionsarelinear.
Answer:
FALSE
Explanation:
Allcostfunctionsarenotlinear,butforcost-behaviorestimationweassumesomearelinearwithinarelevantrange.
Diff:
1
Objective:
1
AACSB:
Analyticalthinking
17)Inacostfunctiony=18,000,theslopecoefficientiszero.
Answer:
TRUE
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
18)Whenestimatingacostfunction,costbehaviorcanbeapproximatedbyalinearcostfunctionwithintherelevantrange.
Answer:
TRUE
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
19)y=a+bX,y=a,andy=bXarethethreebasictypesoflinearcostfunctions.
Answer:
TRUE
Diff:
1
Objective:
1
AACSB:
Analyticalthinking
20)Allotherthingsbeingequal,thelongerthetimehorizonthemorelikelyacostwillbefixed.
Answer:
FALSE
Explanation:
Allotherthingsbeingequal,thelongerthetimehorizon,themorelikelythecostwillbevariable.
Diff:
1
Objective:
1
AACSB:
Analyticalthinking
21)Outsideoftherelevantrange,variableandfixedcost-behaviorpatternsremainconstant.
Answer:
FALSE
Explanation:
Outsideoftherelevantrange,variableandfixedcost-behaviorpatternsmaychange.
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
22)Aparticularcostitemcouldbevariableforonecostobjectandfixedforanothercostobject.
Answer:
TRUE
Diff:
1
Objective:
1
AACSB:
Analyticalthinking
23)Writealinearcostfunctionequationforeachofthefollowingconditions.UseyforestimatedcostsandXforactivityofthecostdriver.
a.Directmanufacturinglaboris$10perhour.
b.Directmaterialscost$15.60percubicyard.
c.Utilitieshaveaminimumchargeof$5,000,plusachargeof$0.30perkilowatt-hour.
d.Machineoperatingcostsinclude$300,000ofmachinedepreciationperyear,plus$100ofutilitycostsforeachdaythemachineryisinoperation.
Answer:
a.y=$10X
b.y=$15.60X
c.y=$5,000+$0.30X
d.y=$300,000+$100X
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
24)Writealinearcostfunctionequationforeachofthefollowingconditions.UseyforestimatedcostsandXforactivityofthecostdriver.
a.Directmaterialscostis$1.70perpound
b.Totalcostisfixedat$8,000permonthregardlessofthenumberofunitsproduced.
c.Autorentalhasafixedfeeof$80.00perdayplus$2.00permiledriven.
d.Machineoperatingcostsinclude$1,000ofmaintenancepermonth,and$12.00ofcoolantusagecostsforeachdaythemachineryisinoperation.
Answer:
a.y=$1.70X
b.y=$8,000
c.y=$80+$2.00X
d.y=$1,000+$12X
Diff:
2
Objective:
1
AACSB:
Analyticalthinking
Objective10.2
1)Alinearcostfunctioncanonlyrepresentfixedcostbehavior.
Answer:
FALSE
Explanation:
Alinearcostfunctioncanrepresentfixed,mixed,orvariablecostbehavior.
Diff:
1
Objective:
2
AACSB:
Analyticalthinking
2)Inagraphicaldisplayofacostfunction,thesteepnessofalinerepresentsthetotalamountoffixedcosts.
Answer:
FALSE
Explanation:
Inagraphicaldisplayofacostfunction,theconstantorthey-interceptrepresentstheamountoffixedcostswhereasthesteepnessofalinerepresentsthevariablecost.
Diff:
2
Objective:
2
AACSB:
Analyticalthinking
3)Itcanbeinferredthatwhenthereisahighcorrelationbetweentwovariables,oneisthecauseoftheother.
Answer:
FALSE
Explanation:
Itcannotbeinferredthatahighcorrelationbetweentwovariablesindicatesthatoneisthecauseoftheother.Ahighcorrelationsimplyindicatesthatthevariablesmovetogether.
Diff:
2
Objective:
2
AACSB:
Analyticalthinking
4)Anexampleofaphysicalcause-and-effectrelationshipiswhenadditionalunitsofproductionincreasetotaldirectmaterialcosts.
Answer:
TRUE
Diff:
2
Objective:
2
AACSB:
Analyticalthinking
5)Managersshouldusepastdatatocreateacostfunctionandthenusetheexactinformationprovidedbythatcostfunctiontocreatethebudgetaryforecastforthenextyear.
Answer:
FALSE
Explanation:
Managersareinterestedinestimatingpastcost-behaviorfunctionsbecausetheestimatescanhelpthemmakemoreaccuratecostpredictions,orforecasts,aboutfuturecosts.Butbettermanagementdecisions,costpredictions,andestimationofcostfunctionscanbeachievedonlyifmanagerscorrectlyidentifythefactorsthataffectcosts.
Diff:
2
Objective:
2
AACSB:
Analyticalthinking
6)Whatarethetwoassumptionsbehindasimplelinearcostfunction?
Brieflyexplainthethreewaysthatalinearcostfunctionmaybehave?
Answer:
Thetwousualassumptionsbehindasimplelinearcostfunctionare:
1)Variationsinthelevelofasingleactivity(thecostdriver)explainthevariationsintherelatedtotalcosts;and
2)Costbehaviorisapproximatedbyalinearcostfunctionwithintherelevantrange.Thismeansthattotalcostversusthelevelofasingleactivitythatisrelatedtothatcostisastraightlinewithintherelevantrange.
Oncelinearityisestablished,therearethreepossibletypesoflinearity:
1)AstrictlyvariablecostoftheformY=bX,wherebistheslopeofthestraightlineandisthevariablecostperunitofthecostdriver;
2)Astrictlyconstantcostofthef
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