cost accounting test bank chapter 10.docx

1、cost accounting test bank chapter 10Cost Accounting, 15e (Horngren/Datar/Rajan)Chapter 10 Determining How Costs BehaveObjective 10.11) A cost function is a _.A) process of calculating present value of projected cash flows B) process of allocating costs to cost centers or cost objects C) mathematical

2、 description of how a cost changes with changes in the level of an activity relating to that cost D) is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputsAnswer: CDiff: 2Objective: 1AACSB: Analytical thinking2) Bennet Compan

3、y employs 20 individuals. Eighteen employees are paid $18 per hour and the rest are salaried employees paid $3,000 a month. Which of the following is the total cost function of personnel? A) y = a + bXB) y = bC) y = bXD) y = aAnswer: ADiff: 2Objective: 1AACSB: Analytical thinking3) Crimson Services,

4、 Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified?A) variable costB) mixed costC) irrelevant costD) fixed cost Answer: ADiff: 2Objective: 1AACSB: Analytical thinking4) For February, the cost components of a picture frame include $0.30 f

5、or the glass, $0.75 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $500. Two hundred fifty frames are expected to be produced in the coming year. What cost function best represents these costs? A) y = 1.85 + 500X B) y = 500 + 1.85X C) y = 3.85 + 600X D) y = 1.05 + 500

6、X Answer: BDiff: 2Objective: 1AACSB: Analytical thinking5) The cost components of a heater include $30 for the compressor, $10 for the sheet molded compound frame, and $75 per unit for assembly. The factory machines and tools cost is $60,000. The company expects to produce 1,000 heaters in the comin

7、g year. What cost function best represents these costs? A) y = 60,000 + 115X B) y = 1,000 + 60,000X C) y = 60,000 + 1,000X D) y = 1,000 + 115X Answer: ADiff: 2Objective: 1AACSB: Analytical thinking6) Which of the following statements is true of a linear cost function?A) It presents variable cost as

8、a slope coefficient.B) It presents total cost as an intercept.C) It presents variable cost as an intercept.D) It presents total cost as slope coefficient.Answer: ADiff: 2Objective: 1AACSB: Analytical thinking7) A finance manager has to select one of the four different suppliers of raw materials. The

9、 total cost functions under the four options are given below. Assume the quality of the raw material to be the same, which of the following is preferred by the finance manager?A) y = 200 + 5XB) y = 200 + 5.50XC) y = 200 + 4.50XD) y = 200 + 4.70XAnswer: CDiff: 3Objective: 1AACSB: Analytical thinking8

10、) If the total cost function is y = 5,000 + 7X, calculate the variable cost for 4,000 units.A) $33,000B) $28,000C) $20,000D) $5,000Answer: BExplanation: B) Explanation: Variable cost for 4,000 units = $7 4,000 units = $28,000Diff: 2Objective: 1AACSB: Application of knowledge9) The cost function y =

11、2,000 + 6X _.A) has a slope coefficient of 2,000 B) has an intercept of 6 C) is a straight line D) represents a fixed cost Answer: CDiff: 2Objective: 1AACSB: Analytical thinking10) The cost function y = 150 + 10X _.A) has a slope coefficient of 150 B) has an intercept of 150 C) is a nonlinear D) rep

12、resents a fixed cost Answer: BDiff: 2Objective: 1AACSB: Analytical thinking11) The cost function y = 10,000 + 3X _.A) represents a mixed cost B) will intersect the y-axis at 3C) has a slope coefficient of 10,000 D) is a curved line Answer: ADiff: 2Objective: 1AACSB: Analytical thinking12) Which of t

13、he following functions represents the least total cost assuming the number of units is equal in each case?A) y = 180 + 7XB) y = 90 + 6XC) y = 90 + 7XD) y = 180 + 6XAnswer: BDiff: 3Objective: 1AACSB: Analytical thinking13) Which of the following is an equation of a fixed cost function? A) y = (a + b)

14、X B) y = a + bX C) y = bX D) y = a Answer: DDiff: 2Objective: 1AACSB: Analytical thinking14) One assumption frequently made in cost behavior estimation is that changes in total costs can be explained by changes in the level of a single activity. Answer: TRUEDiff: 1Objective: 1AACSB: Analytical think

15、ing15) A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking16) All cost functions are linear. Answer: FALSEExplanation: All cost functions are not linear, but for c

16、ost-behavior estimation we assume some are linear within a relevant range.Diff: 1Objective: 1AACSB: Analytical thinking17) In a cost function y = 18,000, the slope coefficient is zero.Answer: TRUEDiff: 2Objective: 1AACSB: Analytical thinking18) When estimating a cost function, cost behavior can be a

17、pproximated by a linear cost function within the relevant range. Answer: TRUEDiff: 2Objective: 1AACSB: Analytical thinking19) y = a + bX, y = a, and y = bX are the three basic types of linear cost functions.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking20) All other things being equal, th

18、e longer the time horizon the more likely a cost will be fixed.Answer: FALSEExplanation: All other things being equal, the longer the time horizon, the more likely the cost will be variable.Diff: 1Objective: 1AACSB: Analytical thinking21) Outside of the relevant range, variable and fixed cost-behavi

19、or patterns remain constant. Answer: FALSEExplanation: Outside of the relevant range, variable and fixed cost-behavior patterns may change. Diff: 2Objective: 1AACSB: Analytical thinking22) A particular cost item could be variable for one cost object and fixed for another cost object. Answer: TRUEDif

20、f: 1Objective: 1AACSB: Analytical thinking23) Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver. a. Direct manufacturing labor is $10 per hour.b. Direct materials cost $15.60 per cubic yard.c. Utilities have a

21、minimum charge of $5,000, plus a charge of $0.30 per kilowatt-hour.d. Machine operating costs include $300,000 of machine depreciation per year, plus $100 of utility costs for each day the machinery is in operation.Answer: a. y = $10Xb. y = $15.60Xc. y = $5,000 + $0.30Xd. y = $300,000 + $100 XDiff:

22、2Objective: 1AACSB: Analytical thinking24) Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver. a. Direct materials cost is $1.70 per pound b. Total cost is fixed at $8,000 per month regardless of the number of u

23、nits produced.c. Auto rental has a fixed fee of $80.00 per day plus $2.00 per mile driven.d. Machine operating costs include $1,000 of maintenance per month, and $12.00 of coolant usage costs for each day the machinery is in operation. Answer: a. y = $1.70Xb. y = $8,000c. y = $80 + $2.00Xd. y = $1,0

24、00 + $12X Diff: 2Objective: 1AACSB: Analytical thinkingObjective 10.21) A linear cost function can only represent fixed cost behavior. Answer: FALSEExplanation: A linear cost function can represent fixed, mixed, or variable cost behavior.Diff: 1Objective: 2AACSB: Analytical thinking2) In a graphical

25、 display of a cost function, the steepness of a line represents the total amount of fixed costs. Answer: FALSEExplanation: In a graphical display of a cost function, the constant or the y-intercept represents the amount of fixed costs whereas the steepness of a line represents the variable cost.Diff

26、: 2Objective: 2AACSB: Analytical thinking3) It can be inferred that when there is a high correlation between two variables, one is the cause of the other. Answer: FALSEExplanation: It cannot be inferred that a high correlation between two variables indicates that one is the cause of the other. A hig

27、h correlation simply indicates that the variables move together.Diff: 2Objective: 2AACSB: Analytical thinking4) An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs. Answer: TRUEDiff: 2Objective: 2AACSB: Analytical thinkin

28、g5) Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.Answer: FALSEExplanation: Managers are interested in estimating past cost-behavior functions because the estimates can help

29、 them make more accurate cost predictions, or forecasts, about future costs. But better management decisions, cost predictions, and estimation of cost functions can be achieved only if managers correctly identify the factors that affect costs.Diff: 2Objective: 2AACSB: Analytical thinking6) What are

30、the two assumptions behind a simple linear cost function? Briefly explain the three ways that a linear cost function may behave? Answer: The two usual assumptions behind a simple linear cost function are:1) Variations in the level of a single activity (the cost driver) explain the variations in the

31、related total costs; and2) Cost behavior is approximated by a linear cost function within the relevant range. This means that total cost versus the level of a single activity that is related to that cost is a straight line within the relevant range. Once linearity is established, there are three possible types of linearity:1) A strictly variable cost of the form Y = bX, where b is the slope of the straight line and is the variable cost per unit of the cost driver;2) A strictly constant cost of the f