cost-accounting-test-bank-chapter-10

1Copyright©2015PearsonEducation,Inc.CostAccounting,15e(Horngren/Datar/Rajan)Chapter10DeterminingHowCostsBehaveObjective10.11)Acostfunctionisa________.A)processofcalculatingpresentvalueofprojectedcashflowsB)processofallocatingcoststocostcentersorcostobjectsC)mathematicaldescriptionofhowacostchangeswithchangesinthelevelofanactivityrelatingtothatcostD)isaverythoroughanddetailedwaytoidentifyingacostobjectwhenthereisaphysicalrelationshipbetweeninputsandoutputsAnswer:CDiff:2Objective:1AACSB:Analyticalthinking2)BennetCompanyemploys20individuals.Eighteenemployeesarepaid$18perhourandtherestaresalariedemployeespaid$3,000amonth.Whichofthefollowingisthetotalcostfunctionofpersonnel?A)y=a+bXB)y=bC)y=bXD)y=aAnswer:ADiff:2Objective:1AACSB:Analyticalthinking3)CrimsonServices,Inc.,employs8individuals.Theyareallpaid$16.50perhour.Howwouldtotalcostsofpersonnelbeclassified?A)variablecostB)mixedcostC)irrelevantcostD)fixedcostAnswer:ADiff:2Objective:1AACSB:Analyticalthinking2Copyright©2015PearsonEducation,Inc.4)ForFebruary,thecostcomponentsofapictureframeinclude$0.30fortheglass,$0.75forthewoodenframe,and$0.80forassembly.Theassemblydeskandtoolscost$500.Twohundredfiftyframesareexpectedtobeproducedinthecomingyear.Whatcostfunctionbestrepresentsthesecosts?A)y=1.85+500XB)y=500+1.85XC)y=3.85+600XD)y=1.05+500XAnswer:BDiff:2Objective:1AACSB:Analyticalthinking5)Thecostcomponentsofaheaterinclude$30forthecompressor,$10forthesheetmoldedcompoundframe,and$75perunitforassembly.Thefactorymachinesandtoolscostis$60,000.Thecompanyexpectstoproduce1,000heatersinthecomingyear.Whatcostfunctionbestrepresentsthesecosts?A)y=60,000+115XB)y=1,000+60,000XC)y=60,000+1,000XD)y=1,000+115XAnswer:ADiff:2Objective:1AACSB:Analyticalthinking6)Whichofthefollowingstatementsistrueofalinearcostfunction?A)Itpresentsvariablecostasaslopecoefficient.B)Itpresentstotalcostasanintercept.C)Itpresentsvariablecostasanintercept.D)Itpresentstotalcostasslopecoefficient.Answer:ADiff:2Objective:1AACSB:Analyticalthinking7)Afinancemanagerhastoselectoneofthefourdifferentsuppliersofrawmaterials.Thetotalcostfunctionsunderthefouroptionsaregivenbelow.Assumethequalityoftherawmaterialtobethesame,whichofthefollowingispreferredbythefinancemanager?A)y=200+5XB)y=200+5.50XC)y=200+4.50XD)y=200+4.70XAnswer:CDiff:3Objective:1AACSB:Analyticalthinking3Copyright©2015PearsonEducation,Inc.8)Ifthetotalcostfunctionisy=5,000+7X,calculatethevariablecostfor4,000units.A)$33,000B)$28,000C)$20,000D)$5,000Answer:BExplanation:B)Explanation:Variablecostfor4,000units=$7×4,000units=$28,000Diff:2Objective:1AACSB:Applicationofknowledge9)Thecostfunctiony=2,000+6X________.A)hasaslopecoefficientof2,000B)hasaninterceptof6C)isastraightlineD)representsafixedcostAnswer:CDiff:2Objective:1AACSB:Analyticalthinking10)Thecostfunctiony=150+10X________.A)hasaslopecoefficientof150B)hasaninterceptof150C)isanonlinearD)representsafixedcostAnswer:BDiff:2Objective:1AACSB:Analyticalthinking11)Thecostfunctiony=10,000+3X________.A)representsamixedcostB)willintersectthey-axisat3C)hasaslopecoefficientof10,000D)isacurvedlineAnswer:ADiff:2Objective:1AACSB:Analyticalthinking4Copyright©2015PearsonEducation,Inc.12)Whichofthefollowingfunctionsrepresentstheleasttotalcostassumingthenumberofunitsisequalineachcase?A)y=180+7XB)y=90+6XC)y=90+7XD)y=180+6XAnswer:BDiff:3Objective:1AACSB:Analyticalthinking13)Whichofthefollowingisanequationofafixedcostfunction?A)y=(a+b)XB)y=a+bXC)y=bXD)y=aAnswer:DDiff:2Objective:1AACSB:Analyticalthinking14)Oneassumptionfrequentlymadeincostbehaviorestimationisthatchangesintotalcostscanbeexplainedbychangesinthelevelofasingleactivity.Answer:TRUEDiff:1Objective:1AACSB:Analyticalthinking15)Acostfunctionisamathematicaldescriptionofhowacostchangeswithchangesinthelevelofanactivityrelatingtothatcost.Answer:TRUEDiff:1Objective:1AACSB:Analyticalthinking16)Allcostfunctionsarelinear.Answer:FALSEExplanation:Allcostfunctionsarenotlinear,butforcost-behaviorestimationweassumesomearelinearwithinarelevantrange.Diff:1Objective:1AACSB:Analyticalthinking17)Inacostfunctiony=18,000,theslopecoefficientiszero.Answer:TRUEDiff:2Objective:1AACSB:Analyticalthinking5Copyright©2015PearsonEducation,Inc.18)Whenestimatingacostfunction,costbehaviorcanbeapproximatedbyalinearcostfunctionwithintherelevantrange.Answer:TRUEDiff:2Objective:1AACSB:Analyticalthinking19)y=a+bX,y=a,andy=bXarethethreebasictypesoflinearcostfunctions.Answer:TRUEDiff:1Objective:1AACSB:Analyticalthinking20)Allotherthingsbeingequal,thelongerthetimehorizonthemorelikelyacostwillbefixed.Answer:FALSEExplanation:Allotherthingsbeingequal,thelongerthetimehorizon,themorelikelythecostwillbevariable.Diff:1Objective:1AACSB:Analyticalthinking21)Outsideoftherelevantrange,variableandfixedcost-behaviorpatternsremainconstant.Answer:FALSEExplanation:Outsideoftherelevantrange,variableandfixedcost-behaviorpatternsmaychange.Diff:2Objective:1AACSB:Analyticalthinking22)Aparticularcostitemcouldbevariableforonecostobjectandfixedforanothercostobject.Answer:TRUEDiff:1Objective:1AACSB:Analyticalthinking23)Writealinearcostfun