INTRODUCTION TO MANAGEMENT ACCOUNTING 16TH EDITION By HORNGREN – TEST BANK
To Purchase
this Complete Test Bank with Answers Click the link Below
If face any problem or
Further information contact us At tbzuiqe@gmail.com
Sample Test
Introduction to Management Accounting, 16e (Horngren)
Chapter 3 Measurement of Cost Behavior
3.1 Questions
1) Managers can influence the amount of fixed and variable costs
in a firm through decisions about ________.
1. A)
product attributes
2. B)
capacity level
3. C)
amount of high technology equipment used for manufacturing products
4. D)
all of the above
Answer: D
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
2) The use of high technology equipment to manufacture products
instead of highly skilled labor usually results in ________.
1. A)
higher discretionary fixed costs
2. B)
higher discretionary variable costs
3. C)
lower risk
4. D)
higher operating leverage
Answer: D
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
3) Which of the following costs can be canceled in the short
run?
1. A)
salary of CEO of company
2. B)
mortgage payment on factory building
3. C)
lease payments on two-year lease for leased equipment in factory
4. D)
management consulting services engaged to change company logo
Answer: D
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
4) A hospital adds a new addition and needs to acquire some new
equipment for the addition. The cost driver for the equipment is patient-days
per month. The new addition increases the patient-days per month outside the
relevant range. What type of equipment costs will change as a result of the
addition?
1. A)
discretionary fixed costs
2. B)
discretionary variable costs
3. C)
committed fixed costs
4. D)
committed variable costs
Answer: C
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
5) Managers can eliminate ________ costs entirely for a given
year in dire times such as a major recession. However, managers cannot
eliminate ________ costs.
1. A)
discretionary variable costs; committed variable costs
2. B)
discretionary fixed costs; committed fixed costs
3. C)
discretionary variable costs; committed fixed costs
4. D)
committed fixed costs; committed variable costs
Answer: B
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
6) If a company eliminates all discretionary costs due to a
severe recession, this could ________.
1. A)
ensure that the company reports a net loss
2. B)
ensure that the company reports a net profit
3. C)
reestablish a company’s competitive position in an industry
4. D)
impair a company’s competitive position in an industry
Answer: D
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
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?
1. A)
This approach is easier and less expensive.
2. B)
The cost of developing a more complex function is greater than the benefit.
3. C)
Cost estimates from the simple function are accurate enough for most decisions.
4. D)
All of the above
Answer: D
Diff: 2
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
8) It may be difficult to trace costs to products or services if
the costs are ________.
1. A)
volume-driven
2. B)
driven by activities directly related to volume
3. C)
driven by multiple cost drivers
4. D)
none of the above
Answer: C
Diff: 2
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
9) Simon Inc. currently produces 110,000 units at a cost of
$440,000. The cost is variable. Next year Simon Inc. expects to produce 115,000
units. Simon’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?
1. A)
$420,000
2. B)
$430,000
3. C)
$440,000
4. D)
$460,000
Answer: D
Diff: 1
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
10) Donahue currently produces 120,000 units at a cost of
$400,000. Of the $400,000 cost, $200,000 is a fixed cost. Next year Donahue
expects to produce 145,000 units. Donahue’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?
1. A)
$200,000
2. B)
$241,667
3. C)
$441,667
4. D)
$483,333
Answer: A
Diff: 2
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
11) The following data points are available. This is an example
of a ________ cost.
Units Costs
600
$560
650
$565
800
$580
900
$590
1. A)
variable
2. B)
fixed
3. C)
mixed
4. D) none
of the above
Answer: C
Diff: 1
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
12) A car lease payment is computed based solely on the number
of miles driven. This is an example of a ________.
1. A)
variable cost
2. B)
mixed cost
3. C)
step cost
4. D)
stair cost
Answer: A
Diff: 1
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
13) Knowledge about the behavior of different costs in a service
department such as maintenance can be used to ________.
1. A)
plan costs
2. B)
provide feedback to managers
3. C)
make decisions about the most efficient use of resources
4. D)
all of the above
Answer: D
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
14) The fixed costs required to achieve a desired level of
production or to provide a desired level of service, while maintaining product
or service attributes, are ________.
1. A)
discretionary fixed costs
2. B)
committed fixed costs
3. C)
capacity costs
4. D)
step costs
Answer: C
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
15) ________ arise as a result of strategic decisions about the
scale and scope of an organization’s activities.
1. A)
Capacity costs
2. B)
Discretionary fixed costs
3. C)
Mixed costs
4. D)
Committed fixed costs
Answer: A
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
16) In a corporate setting, property taxes are an example of
a(n) ________.
1. A)
mixed cost
2. B)
committed fixed cost
3. C)
discretionary fixed cost
4. D) engineering
cost
Answer: B
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
17) Costs arising from the possession of facilities, equipment
and a basic organizational structure are ________.
1. A)
capacity costs
2. B)
discretionary costs
3. C)
committed fixed costs
4. D)
engineered costs
Answer: C
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
18) ________ have no obvious relationship to levels of output
activity, but are determined as part of the periodic planning process.
1. A)
Discretionary fixed costs
2. B)
Committed fixed costs
3. C)
Capacity costs
4. D)
Engineered costs
Answer: A
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
19) Due to the economic downturn, a company has reduced
charitable donations to community groups. This is an example of a ________.
1. A)
variable cost
2. B)
committed fixed cost
3. C)
capacity cost
4. D)
discretionary fixed cost
Answer: D
Diff: 1
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
20) In an economic downturn, a company could temporarily reduce
or eliminate a(n) ________.
1. A)
lease payment
2. B)
salaries of key personnel
3. C)
employee training program
4. D)
insurance on corporate offices
Answer: C
Diff: 1
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
21) In an economic downturn, a company could temporarily reduce
or eliminate a(n) ________.
1. A)
property taxes on factory building
2. B)
insurance on factory building
3. C)
lease payments on computers in corporate headquarters
4. D)
public relations department
Answer: D
Diff: 1
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
22) Only major changes in the scale or scope of operations can change
________ in future periods. Managers can vary spending levels for ________ in
the short run.
1. A)
committed fixed costs; capacity costs
2. B)
committed fixed costs; discretionary fixed costs
3. C)
discretionary fixed costs; capacity costs
4. D)
capacity costs; committed fixed costs
Answer: B
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
23) Costs that may be essential to the long-run achievement of
the organization’s goals, but that managers can almost reduce to zero in the
short-run, are called ________.
1. A)
capacity costs
2. B)
committed fixed costs
3. C)
discretionary fixed costs
4. D)
mixed costs
Answer: C
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
24) In a corporate setting, a mortgage payment would be
identified as a ________.
1. A)
purely variable cost
2. B)
discretionary fixed cost
3. C)
committed fixed cost
4. D)
mixed cost
Answer: C
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
25) In an economic downturn, a company could temporarily reduce
or eliminate ________.
1. A)
depreciation expense on corporate building
2. B)
bond interest payment
3. C)
property taxes on corporate building
4. D)
advertising and promotion
Answer: D
Diff: 1
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
26) In an economic recession, a company could NOT eliminate
________.
1. A)
employee training program
2. B)
research and development projects
3. C)
public relations department
4. D)
depreciation expense on factory machines
Answer: D
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
27) Which statement regarding fixed costs is TRUE?
1. A)
Discretionary fixed costs preserve management’s flexibility.
2. B)
Committed fixed costs preserve management’s flexibility.
3. C)
Both discretionary and committed fixed costs preserve management’s flexibility.
4. D)
Discretionary fixed costs limit management’s flexibility.
Answer: A
Diff: 2
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
28) Most companies make capacity decisions frequently.
Answer: FALSE
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
29) Capacity costs are variable costs related to a desired level
of production or service.
Answer: FALSE
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
30) Committed fixed costs usually arise from the possession of
facilities, equipment and a basic organizational structure.
Answer: TRUE
Diff: 2
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
31) Companies can reduce or eliminate committed fixed costs when
demand falls during an economic downturn.
Answer: FALSE
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
32) Volume-driven costs can be easily traced to products or
services.
Answer: TRUE
Diff: 1
LO: 3-1
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
33) Managers cannot eliminate discretionary fixed costs.
Answer: FALSE
Diff: 2
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
34) The use of high-technology methods rather than labor in
manufacturing products usually means a much greater fixed-cost component to
total costs.
Answer: TRUE
Diff: 2
LO: 3-1
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
3.2 Questions
1) A mixed-cost function is graphed as a ________.
1. A)
nonlinear line
2. B)
curved line
3. C)
line with a break for fixed costs
4. D)
straight-line
Answer: D
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
2) In a linear cost function, the slope measures the ________.
1. A)
total fixed cost
2. B)
total variable cost
3. C)
variable cost per unit of cost driver
4. D)
fixed cost per unit of cost driver
Answer: C
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
3) In a graph of a mixed cost function, the y-axis is ________
and the x-axis is ________.
1. A)
fixed cost; cost driver activity
2. B)
fixed cost; variable cost per unit
3. C)
mixed cost; volume in units
4. D)
cost; cost driver activity
Answer: D
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
4) When estimating the cost of the maintenance department in a
hospital for a month, what cost driver should be used?
1. A)
number of patients per month
2. B)
number of nurses working per month
3. C)
number of operations per month
4. D)
number of patients per month times the length of stay per patient
Answer: D
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
5) When estimating the total cost of a one-way flight from New
York to Los Angeles, what cost driver should be used?
1. A)
number of miles on flight
2. B)
number of passengers on flight
3. C)
number of pounds of baggage on flight
4. D)
number of passengers on flight times the number of miles on flight
Answer: D
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
6) In a linear cost function, the fixed cost is ________.
1. A)
dependent on the cost driver
2. B)
dependent on the independent variable
3. C)
independent of the cost driver
4. D) independent
of the intercept
Answer: C
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
7) When estimating a cost function, we assess reliability using
________.
1. A)
visual inspection
2. B)
plausible relationships
3. C)
goodness of fit
4. D)
intuition
Answer: C
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
8) A linear cost function is estimated over the relevant range
of 0 to 1,000 orders. The equation estimated is: Y = $25,000 + $89X where Y
equals the total order-processing cost and X equals the number of orders. If
the number of orders increases to 1,800, what is the predicted total order-processing
cost?
1. A)
$25,000
2. B)
$160,200
3. C)
$185,200
4. D)
cannot be determined
Answer: D
Diff: 2
LO: 3-2
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
9) When estimating the cost of the laundry department in a
hospital, which of the following cost drivers should be used?
1. A)
number of patients
2. B)
number of patients times the length of stay per patient
3. C)
number of patients in intensive care and critical care
4. D)
number of pounds of laundry
Answer: D
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
10) When managers graph a linear cost function with one cost
driver, the intercept represents the ________ cost and the slope represents the
________ cost.
1. A)
variable; fixed
2. B)
fixed; variable
3. C)
fixed; mixed
4. D)
variable; mixed
Answer: B
Diff: 1
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
11) A cause and effect relationship between a ________ and a
________ is desirable in order to obtain accurate and useful cost functions.
1. A)
cost driver; cost function
2. B)
cost function; resource cost
3. C)
cost driver; resource cost
4. D) step
cost; capacity cost
Answer: C
Diff: 1
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
12) When developing cost functions, which of the following
statements is FALSE?
1. A) The
cost function must be believable.
2. B)
The cost function should explain past cost behavior.
3. C)
Personal observations of costs and activities provide the best evidence of a
plausible relationship between a cost and its cost driver.
4. D)
The cost function does not have to be plausible.
Answer: D
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
13) Sunrise Motel’s cost function is given as:
Y = $75,000 + $9.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year, Sunrise Motel has 8,000 guest days. In the
next year, Sunrise Motel expects an occupancy level of 10,000 guest days. (All
costs next year will remain in the same relevant range as the current year.)
What is the expected fixed custodial cost for next year?
7. A)
$7.50
8. B)
$50,000
9. C)
$62,500
10. D)
$75,000
Answer: D
Diff: 2
LO: 3-2
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
14) Sunset Motel’s cost function is given as:
Y = $75,000 + $9.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year, Sunset Motel has 8,000 guest days. In the
next year, Sunset Motel expects an occupancy level of 10,000 guest days. (All
costs next year will remain in the same relevant range as the current year.)
What is the expected total variable custodial cost for next year?
1. A)
$60,000
2. B)
$75,000
3. C)
$95,000
4. D)
$170,000
Answer: C
Diff: 2
LO: 3-2
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
15) Sheboygan Motel’s cost function is given as:
Y = $120,000 + $2.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year, Sheboygan Motel has 8,000 guest days. In
the next year, Sheboygan Motel expects an occupancy level of 10,000 guest days.
(All costs next year will remain in the same relevant range as the current
year.) What is the expected total custodial cost for next year?
1. A)
$37,000
2. B)
$120,000
3. C)
$125,000
4. D)
$145,000
Answer: D
Diff: 2
LO: 3-2
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
16) In a mixed-cost linear function with one cost driver, the
intercept is the ________ and the slope is the ________.
1. A)
fixed cost; step cost
2. B)
fixed cost; variable cost
3. C)
variable cost; fixed cost
4. D)
variable cost; step cost
Answer: B
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
17) Consider the following linear mixed-cost function:
Y = $120,000 + $2.70X
Where: Y = total annual maintenance cost
X = number of patient-days
What does the $120,000 represent?
1. A)
variable cost per patient-day
2. B)
total variable cost
3. C)
fixed cost per patient-day
4. D)
total fixed cost
Answer: D
Diff: 2
LO: 3-2
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
18) Consider the following linear mixed-cost function:
Y = $110,000 + $5.50X
Where: Y = total annual custodial cost
X = number of patient-days
What does the $5.50 represent?
1. A)
total fixed cost
2. B)
total variable cost
3. C)
fixed cost per patient-day
4. D) variable
cost per patient-day
Answer: D
Diff: 2
LO: 3-2
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
19) Managers apply two criteria to obtain accurate and useful
cost functions. These criteria are ________.
1. A)
plausibility and believability
2. B)
plausibility and reliability
3. C)
reliability and validity
4. D)
validity and plausibility
Answer: B
Diff: 1
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
20) In relation to a cost function, the term reliability means
________.
1. A)
whether the costs and activities can be easily observed
2. B)
whether the cost function conforms to a given mathematical model
3. C)
how well the cost function predicts future costs
4. D)
how well the cost function explains past cost behavior
Answer: D
Diff: 1
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
21) A cost function is an algebraic equation used to describe
the relationship between a cost and its cost driver(s).
Answer: TRUE
Diff: 1
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
22) Managers should apply plausibility and reliability to obtain
accurate and useful cost functions.
Answer: TRUE
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
23) When referring to a cost function, plausibility refers to
whether you can rely upon the cost function for predicting the future.
Answer: FALSE
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
24) In a linear mixed cost function, the slope of the function
is the fixed cost per unit of the cost driver.
Answer: FALSE
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
25) Goodness of fit pertains to how well a cost function
predicts cost behavior.
Answer: FALSE
Diff: 2
LO: 3-2
AACSB: Reflective thinking skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
26) Atlanta Senior Center is planning its annual fundraiser. The
event committee has developed the following budget for the event.
Ballroom
rental
$3,000
Entertainment
$2,500
Printing
$600 plus $9 per person
Food
$30 per person
Decorations
$700 plus $5 per person
Required:
1. A)
Determine the cost function.
2. B) If
Atlanta Senior Center charges $100 per person, and 1,000 people attend, how
much profit will be derived by this event?
Answer: A) Fixed cost = $3,000 + $2,500 + $600 + $700 =
$6,800
Variable cost = $9 + $30 + $5 = $44 per person
Y = $6,800 + $44X
Where: Y = Total cost of fundraiser
X = Number of attendees
1. B)
($100 × 1,000) – [$6,800 + ($44 × 1,000)] = $49,200
Diff: 2
LO: 3-2
AACSB: Analytic skills
Learning Outcome: Define and distinguish between variable,
fixed and mixed costs
3.3 Questions
1) An activity analysis has shown that the number of components
added to Product X and Product Y is the cost driver for support costs. Support
costs are $20 per component. Product X has 4 components and Product Y has 8
components. What amounts of support costs should be assigned to Product X and
Product Y?
Product
X
Product Y
6. A)
$6.67 $13.33
7. B)
$20 $20
8. C)
$80 $160
9. D)
$80 $320
Answer: C
Diff: 2
LO: 3-3
AACSB: Analytic skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
2) Direct labor cost is the primary cost driver of support costs
for two products. Product One has direct labor costs of $8.50 per unit and
Product Two has direct labor costs of $130 per unit. The support costs assigned
to each product is the direct labor cost times five. What is the support cost
assigned to Product One and Product Two?
Product
One
Product Two
8. A)
$8.50 $130
9. B)
$5.00 $76.47
10. C)
$42.50 $650
11. D)
$5.00 $26.00
Answer: C
Diff: 2
LO: 3-3
AACSB: Analytic skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
3) The greatest benefit of activity analysis is that it directs
management accountants to the ________.
1. A)
relevant costs for decision making
2. B)
most accurate product cost
3. C)
appropriate cost driver for each cost
4. D)
most accurate product price
Answer: C
Diff: 1
LO: 3-3
AACSB: Reflective thinking skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
4) The process of identifying appropriate cost drivers and their
effects on the costs of making a product or providing a service is called
________.
1. A)
account analysis
2. B)
activity analysis
3. C)
cost analysis
4. D)
product analysis
Answer: B
Diff: 1
LO: 3-3
AACSB: Reflective thinking skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
5) Account analysis is used to identify appropriate cost drivers
and their effects on the costs of making a product or providing a service.
Answer: FALSE
Diff: 2
LO: 3-3
AACSB: Reflective thinking skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
6) The cost of the Maintenance Department at Forest
Manufacturing has always been charged to the production departments based on
the number of employees. Recently, an activity analysis of possible cost
drivers was performed which indicated that the square feet of space may also be
a predictor of costs to be assigned to each production department. The
Maintenance Department cost is $500,000. The following data is available:
Production Departments
Dept.
A Dept.
B Dept. C
Number of
Employees
300
25
50
Square Feet of
Space
5,000
10,000
25,000
Required:
1. Determine
the amount of the maintenance department cost that should be allocated to
Department A and Department B if the cost driver used is: (A) number of
employees and (B) square feet of space.
2. Does
the choice of the cost driver affect the costs assigned to each department?
Answer:
1. Department
A:
2. A)
300/375 × $500,000 = $400,000
3. B)
5/40 × $500,000 = $62,500
Department B:
1. A)
25/375 × $500,000 = $33,333
2. B)
10/40 × $500,000 = $125,000
3. Yes,
the cost driver does change the cost assigned to each department.
Diff: 2
LO: 3-3
AACSB: Analytic skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
3.4 Questions
1) When estimating cost functions, engineering analysis based on
observations of employee behavior has the following disadvantage: ________.
1. A)
the employees may have altered their normal work habits because they are being
observed
2. B) it
is less expensive than account analysis
3. C) it
does not use all of the data points
4. D)
the coefficient of determination is not reliable
Answer: A
Diff: 2
LO: 3-4
AACSB: Reflective thinking skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
2) To approximate cost functions for a particular manufacturing
process, engineering analysis relies on ________.
1. A)
statistical analysis
2. B)
mathematical analysis
3. C)
graphs
4. D)
actual observations of the ongoing process
Answer: D
Diff: 2
LO: 3-4
AACSB: Reflective thinking skills
Learning Outcome: Discuss and use various methods to
estimate the variable and fixed costs portions of a mixed cost
Comments
Post a Comment