Chapter 21

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service? a. number of trucks in service b. number of packages picked up c. total miles driven d. number of truck drivers

c. total miles driven

Strait Co. manufactures office furniture. During the most productive month of the year, 3,000 desks were manufactured at a total cost of $59,000. In the month of lowest production, the company made 1,125 desks at a cost of $38,000. Using the high-low method of cost estimation, total fixed costs are a. $25,400 b. $21,000 c. $13,000 d. $42,000

a. $25,400

Which of the graphs in Figure 21-1 illustrates the behavior of a total fixed cost? a. Graph 1 b. Graph 4 c. Graph 2 d. Graph 3

a. Graph 1

Which of the graphs in Figure 21-1 illustrates the behavior of a total variable cost? a. Graph 3 b. Graph 4 c. Graph 1 d. Graph 2

a. Graph 3

Which of the following is an example of a cost that varies in total as the number of units produced changes? a. direct materials cost b. straight-line depreciation on factory equipment c. property taxes on factory buildings d. salary of a production supervisor

a. direct materials cost

Given the following cost and activity observations for Bounty Company's utilities, use the high-low method to determine Bounty's variable utilities cost per machine hour. Round to the nearest cent. Cost Machine March $3,100 15000 April 2700 10000 May 2900 12000 June 3600 18000 a. $10.00 b. $0.11 c. $0.67 d. $0.63

b. $0.11

Cost behavior refers to the manner in which a cost a. is allocated to products b. changes as the related activity changes c. is estimated d. is used in setting selling prices

b. changes as the related activity changes

Which of the following statements regarding fixed and variable costs is true? a. Both costs are constant when considered on a total basis. b. Both costs are constant when considered on a per-unit basis. c. Variable costs are constant in total, and fixed costs vary in total. d. Fixed costs are constant in total, and variable costs are constant per unit.

c. Variable costs are constant in total, and fixed costs vary in total.

Which of the following activity bases would be the most appropriate for food costs of a hospital? a. number of nurses scheduled to work b. number of MRIs taken c. number of patients who stay in the hospital d. quantity of prescriptions filled

c. number of patients who stay in the hospital

Given the following cost and activity observations for George Company's utilities, use the high-low method to determine George's variable utilities cost per machine hour. Cost Machine March $16500 105000 April 18000 120000 May 16000 100000 June 17500 117000 a. $100.00 b. $10.00 c. $1.00 d. $0.10

d. $0.10

iven the following costs and activities for Dance Company, use the high-low method to determine Dance's variable electrical costs per machine hour. Cost Machine hrs August $11700 15000 September 13200 17500 October 11400 14500 a. $1.20 b. $2.08 c. $6.00 d. $0.60

d. $0.60

The three most common cost behavior classifications are a. variable costs, period costs, and differential costs b. variable costs, sunk costs, and opportunity costs c. variable costs, product costs, and sunk costs d. fixed costs, variable costs, and mixed costs

d. fixed costs, variable costs, and mixed costs

Which of the following is not an example of a cost that varies in total as the number of units produced changes? a. wages of assembly worker b. insurance premiums on factory building c. direct materials cost d. electricity per kilowatt-hour to operate factory equipment

b. insurance premiums on factory building

Which of the following describes the behavior of a variable cost per unit? a. varies in increasing proportion with changes in the activity level b. remains constant with changes in the activity level c. varies in direct proportion with the activity level d. varies in decreasing proportion with changes in the activity level

b. remains constant with changes in the activity level

Costs that vary in total in direct proportion to changes in an activity level are called a. differential costs b. variable costs c. fixed costs d. sunk costs

b. variable costs

For purposes of analysis, mixed costs are a. classified as variable costs b. classified as period costs c. separated into their variable and fixed cost components d. classified as fixed costs

c. separated into their variable and fixed cost components

As production increases, variable costs per unit a. increase b. either increase or decrease, depending on the fixed costs c. stay the same d. decrease

c. stay the same

he graph of a variable cost when plotted against its related activity base appears as a a. circle b. rectangle c. straight line d. curved line

c. straight line

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes? a. units-of-production depreciation on factory equipment b. direct materials c. direct labor d. salary of a factory supervisor

d. salary of a factory supervisor

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs? Variable Costs Fixed Costs Mixed Costs a.increase increase increase b. decrease increase increase c.no change no change increase d.increase no change increase

d.increase no change increase