ACCT 2301 Chapter 3

When a mixed cost is graphed the Y-intercept corresponds to the a. fixed cost b. variable rate c. price of the units sold d. step cost

a. fixed cost

If output decreases a. total fixed costs will remain the same b. total variable costs will increase c. per-unit fixed costs will decrease d. all of these are correct

a. total fixed costs will remain the same

"outliers" are points that seem to fit the general pattern of behavior true or false

False

The slope of a mixed cost line is equal to the fixed element of the cost True or False

False

Using a linear regression program, the term "intercept" refers to the variable cost True or False

False It refers to the fixed cost

Per-unit fixed costs a. decrease as output decreases b. can be misleading and lead to poor decisions c. increase as output increases d. stay the sam as output changes

b. can be misleading and lead to poor decisions

Discretionary fixed costs a. cannot be easily changed b. can be changed easily at management's discretion c. increase as output increases d. often involve a long-term contract

b. can e changed easily at management's discretion

which of the following would probably be a variable cost at a college? a. salary of the head janitor b. cost of registration forms c. salary of the college president d. none of these options

b. cost of registration forms

which of the following would be an example of a fixed cost? a. wages for an assembly line worker b. depreciation on equipment c. electric bill d. materials used

b. depreciation on equipment

Which of the following is not an example of a discretionary fixed cost? a. advertising cots b. direct materials c. research and development d. training costs

b. direct materials

A fixed cost within the relevant range a. increase in total as output decreases b. does not change in total as output changes c. decreases in total as output increases d. all of these are correct

b. does not change in total a output changes

Figure 3-9 Total cost= $75,620 + ($242 x number of customers) The term "total cost" a. is the independent variable b. is the dependent variable c. is the variable rate d. is the intercept

b. is the dependent variable

A committed fixed cost a. can easily be changed b. often involves a long-term contract c. changes when the level of output changes d. all of these are correct

b. often involves a long-term contract

The range of output over which the assumed cost relationship is valid for normal operations of a firm is called the a. linear range b. relevant range c. mixed range d. dependent range

b. relevant range

If output increases by 50% and is still within the relevant range a. net income will increase by 50% b. total variable cost will increase by 50% c. total fixed costs will increase by 50% d. per-unit fixed cost will remain the same

b. total variable costs will increase by 50%

which of the following is an example of a discretionary fixed cost? a. insurance on automobiles b. depreciation of equipment c. advertising costs d. rental of machinery

c. advertising costs

A mixed cost a. remains constant when the output level increases b. cannot be separated c. contains both a fixed and variable component d. all of these are correct

c. contains both a fixed and variable component

A factor that causes or leads to a change in a cost or activity is a(n) a. cost formula b. step cost c. driver d. mixed cost

c. driver

which of the following would not be an example of a fixed cost? a. insurance on factory building b. propert taxes c. glue used to put together tables d. depreciation on factory building

c. glue used to put together tables

Figure 3-9. Total cost = $75,620 + ($242 x number of customers) The term "number of customers) a. is the variable rate b. is the intercept c. is the independent variable d. is the dependent variable

c. is the independent variable

If output increases a. per-unit fixed cost will increase b. per-unit variable costs will decrease c. total variable costs will increase d. per-unit variable costs will increae

c. total variable costs will increase

The method of least squares a. is the least accurate method b. can easily be calculated by hand c. uses the results of regression analysis to construct a cost formula d. analyzes a cost relationship by plotting the data points on a graph

c. uses the results of regression analysis to construct a cost formula

Which of the following would be a discretionary fixed cost for a law firm?? a. depreciation on furniture and equipment b. cost of legal forms c. salary of receptionist d. advertising

d. advertising

The relevant range a. is the normal range of output b. is the range of output where cost relationships are valid c. may change from period to period d. all of these are correct

d. all of these are correct

Total variable costs a. increases as output increases b. decreases as output decreases c. equal a variable rate x amount of output d. all of these are correct

d. all of these are correct

Variable costs within the relevant range a. stay constant on a per unit basis as output changes b. increase in total as output increases c. decrease in total as output decreases d. all of these are correct

d. all of these are correct

Which of the following would be a variable cost for a dentist's office? a. salary of dentist b. cost of renting office space c. depreciation on equipment d. cost of teeth cleaning material

d. cost of teeth cleaning material

Figure 3-1. Total cost= Fixed cost + (variable rate x output) Refer to Figure 3-1. In the cost formula above which element would be the intercept? a. total cost b. variable rate c. output d. fixed cost

d. fixed cost

Figure 3-10. Total cost= $87,100 + ($210 x number of tax returns) The term "number of tax returns" a. is the variable rate b. is the dependent variable c. is the intercept d. is the independent variable

d. is the independent variable

Which of the following would probably be a fixed cost in a fast-food restaurant? a. cost of hamburgers b. cost of french fries c. utility cost d. shift manager's salary

d. shift manager's salary

Figure 3-1. Total cost = Fixed cost + (variable rate x output) Refer to 3-1. In the cost formula above which element would be the dependent variable? a. variable rate b. fixed cost c. output d. total cost

d. total cost