Ch. 2 Adaptive Study Plan - Karyn Smith

The value of coefficient of determination always lies between _____. a. 1 and 100 b. 0 and 1 c. 1 and 10 d. 0 and 10

b. 0 and 1 (Since coefficient of determination (R2) is the percentage of variability explained, its value always lies between 0 and 1.)

The following data relates to Mandarin Company. Units in beginning inventory — Units produced 14,000 Units sold ($300 per unit). 12,000 Variable costs per unit: Direct materials $80 Direct labor 160 Variable overhead 70 Fixed costs: Fixed overhead per unit produced $40 Fixed selling and admin expenses 160,000 Determine the value of ending inventory under absorption costing. a. $620,000 b. $480,000 c. $560,000 d. $700,000

d. $700,000 (Under absorption costing, all product costs are included in the value of ending inventory.)

Mahogany Company manufactures computer keyboards. The total cost of producing 13,000 keyboards is $384,000. The total fixed cost amounts to $150,000. Determine the total cost of manufacturing 27,000 keyboards. a. $636,000 b. $738,000 c. $618,000 d. $486,000

a. $636,000 (Total cost of manufacturing includes total fixed cost and total variable cost.)

Turquoise Company manufactures travel bags. The high output occurred in May, with 1,000 units produced at a total cost of $8,000. The low output was in January, with 400 units produced at a total cost of $2,800. Determine the variable rate by using the high and low points. a. $8.67 b. $5.20 c. $8.00 d. $7.00

a. $8.67 (The variable rate under the high-low method is determined by using the high and low point costs and the high and low point outputs.)

The closer the coefficient of determination (R2) is to _____, the better. a. 1 b. 0.5 c. -1 d. 0

a. 1 (The higher the percentage of cost variability explained, the better job the independent variable does of explaining the dependent variable.)

Which of the following is an example of a variable cost for a manufacturing unit? a. Direct materials cost b. Plant supervisor's salary c. Lease payment d. Advertising cost

a. Direct materials cost (A variable cost increases in total with an increase in output and decreases in total with a decrease in output.)

If the cost equation yields a coefficient of determination of 76%, it means that the: a. independent variable explains 76% of the variability in cost. b. dependent variable explains 76% of the variability in cost. c. dependent variable explains 24% of the variability in cost. d. independent variable explains 24% of the variability in cost.

a. independent variable explains 76% of the variability in cost. (The percentage of variability in the dependent variable explained by an independent variable is called the coefficient of determination (R2).)

A step cost with narrow steps means that the cost: a. is a discretionary variable cost. b. changes in response to small changes in output. c. changes only if output changes in large quantities. d. is a committed variable cost.

b. changes in response to small changes in output. (A step cost with narrow steps means that the cost changes in response to fairly small changes in output. If the steps are very narrow, we can approximate the step cost as a strictly variable cost.)

In recording mixed costs such as utilities in the accounting records, usually, _____. a. only the variable component is recorded b. no attempt is made to separate variable and fixed costs c. only the fixed component is recorded d. a clear distinction between fixed and variable costs is made

b. no attempt is made to separate variable and fixed costs (If mixed costs are a very small percentage of total costs, formal cost separation may be more trouble than it's worth. In this case, mixed costs could be assigned to either the fixed or variable cost category without much concern for the classification error or its effect on decision making.)

The following information relates to Diamond Inc. Units sold ($400 per unit) 2,000 Variable costs per unit: Direct materials $80 Direct labor 50 Variable overhead 20 Fixed costs: Fixed overhead per unit produced $30 Fixed selling and admin. expenses 200,000 Determine the cost of goods sold under absorption costing. a. $540,000 b. $400,000 c. $360,000 d. $500,000

c. $360,000 (Absorption-costing unit cost = $80 + $50 +$20 + $30 = $180 Cost of Goods Sold = Units Sold × Absorption Unit Product Cost = 2,000 units × $180 = $360,000)

Which of the following costs is always expensed on the income statement under absorption costing as well as variable costing? a. The cost of direct labor b. Fixed factory overhead c. Administrative expenses d. The cost of direct materials

c. Administrative expenses (Selling and administrative expenses are never included in product costs. They are always expensed on the income statement and never appear on the balance sheet.)

Which of the following methods identifies the regression line that minimizes the differences between predicted costs and actual costs? a. The scattergraph method b. The managerial judgment method c. The method of least squares d. The high-low method

c. The method of least squares (The method that identifies the regression line that minimizes cost prediction errors or differences between predicted costs and actual costs is a statistical way to find the best-fitting line through a set of data points.)

Gamma Company manufactures power transmission grids. It has 4 sales representatives, each earning a salary of $41,000 plus a commission of $200 per grid sold. The total cost associated with the sales representatives is an example of a: a. fixed cost. b. step cost. c. mixed cost. d. variable cost.

c. mixed cost (The total cost associated with the sales representatives has both a fixed and a variable component.)

The following data relates to Mandarin Company. Units in beginning inventory — Units produced 14,000 Units sold ($300 per unit) 12,000 Variable costs per unit: Direct materials $80 Direct labor 160 Variable overhead 70 Fixed costs: Fixed overhead per unit produced $40 Fixed selling and administrative expenses 160,000 Determine the value of ending inventory under absorption costing. a. $620,000 b. $480,000 c. $560,000 d. $700,000

d. $700,000 (Under absorption costing, all product costs are included in the value of ending inventory.)

When the level of output increases within the relevant range, _____. a. both fixed cost per unit and variable cost per unit decrease b. both fixed cost per unit and variable cost per unit do not change c. fixed cost per unit does not change, but the variable cost per unit decreases d. fixed cost per unit decreases, but the variable cost per unit does not change

d. fixed cost per unit decreases, but the variable cost per unit does not change (The total fixed cost is always constant, but the total variable cost varies with the level of output.)

In the mixed cost equation: Total Cost = Fixed Cost + (Variable Rate × Units of Output), the dependent variable is _____. a. fixed cost b. variable rate c. units of output d. total cost

d. total cost (The dependent variable is a variable whose value depends on the value of another variable.)