HW-CH6
The vertical intercept of the __________ line is zero.
variable cost(s)
6.3) Which of the following is true regarding variable costing?
A. It treats variable MOH costs as period costs, rather than as product costs. B. It is allowed by GAAP for external reporting purposes. C. It treats fixed MOH costs as period costs, rather than as product costs. <<< D. It is allowed by the IRS for tax preparation.
6.2) Which of the following is false?
A. Step costs are fixed over small ranges of activity. B. Curvilinear costs can be approximated as mixed costs or broken into smaller relevant ranges for cost prediction purposes. C. The concept of relevant range is applicable to both fixed and variable costs. D. Changes in the variable costs per unit often occur within a given relevant range.<<<
RQ 21 [6.1-1] Total fixed costs do not change in response to changes in the volume of production
TRUE
RQ 4 [6.1-5] Fixed costs per unit decrease as production levels increase.
TRUE
RQ 8 [6.1-8] The line of a graph representing total fixed costs will be a horizontal line.
TRUE
The ________ per unit is inversely related to the volume of activity.
fixed cost(s)
The cost equation resulting from _________ is described as "the line of the best fit".
regression analysis
_________ are a type of cost behavior that is fixed over a small range of activity and then jumps to a different fixed level with moderate changes in volume.
step cost(s)
RQ 10 [6.1-28] Which of the following is a fixed cost?
A) Straight-line depreciation expense<<< B) Direct Materials Cost C) Direct Labor Cost D) Sales Commission Expense
6.1) If x=35, v=$100, and f=$1,000, then total costs equal RQ 11) If x=$55, v=$130. and f=$1800, then total costs equal
6.1) $4,500 <<< ($100x35)+$1,000= RQ 11) $8,950 <<< ($130x55)+$1,800= (V x X) + F = Y
RQ 23 [6.3-12] Which is true about a scatterplot?
A) If there is a strong relationship between cost and volume, the points will fall in a linear pattern. <<< B) A strong relationship between production and inventory is shown by a linear pattern. C) Cost and volume have no effect on the pattern of the points on a scatterplot. D) If there is a strong relationship between cost and volume, the points will fall in a scattered pattern.
RQ 5 [6.2-36] In the equation y=$7.20x + $790, "x" represents
A) Number of Units Produced. <<< B) Total Fixed Costs C) Total Costs D) None of the above
6.3) Which of the following is false?
A. The operating income of manufacturers will always be the same, regardless of whether variable or absorption costing is used. <<< B. The contribution margin is equal to sales revenue minus variable expenses. C. A contribution margin income statement is organized by cost behavior. D. Under absorption costing, the fluctuation of inventory levels will impact operating income, regardless of sales revenue.
6.2) Which of the following is true about regression analysis?
A. The resulting S-squared statistic shows how well the line fits the data points. B. It is based on two data points. C. It is theoretically less sound than the high-low method. D. It is sometimes referred to as the line of best fit. <<<
6.2) Which of the following is false about the high-low method?
A. The slope found from the method represents the variable cost per unit. B. Selection of the high and low data points should be based on cost, not volume. <<< C. It yields an equation for a straight line connecting the high and low data points. D. It is based on only two data points.
6.1) Which of the following is true?
A. Total fixed costs increase when volume increases. B. Total fixed costs decrease when volume increases. C. Fixed cost per unit increases when volume increases. D. Fixed cost per unit decreases when volume increases. <<<
6.2) Which of the following is false?
A. When performing account analysis, managers use their judgment to classify cost behavior. B. When creating a scatter plot, volume should be plotted on the x-axis while cost should be plotted on the y-axis. C. Scatter plots should be prepared to help identify outliers. D. Data points falling in a linear pattern suggest a weak relationship between cost and volume. <<<
6.1) A graph of a variable cost starts at
A. any point on the y-axis and is horizontal. B. any point on the y-axis and slopes upward. C. the origin and slopes upwards. <<< D. the origin and is horizontal.
6.1) In the cost equation y = vx + f, the term "v" stands for
A. total cost. B. variable cost per unit. << C. fixed cost. D. total variable cost.
6E1-3) Tammary Corporation has an activity-based costing system. Stephen prepares reports each month that are long and full of facts. The reports are hard to understand for anyone but Stephen.
COMPETENCE
6E1-4) Cliff, an accountant at the Wall Corporation, did not attend the training for the new activity-based costing system because he figures it will not be much different from the current allocation system.
COMPETENCE
6E1-S522) Cassidy Ritter is a bubbly, fun person. She continually makes recommendations one day after the recommendations were needed. She figures that the managers will tolerate the tardiness of the recommendations because the recommendations are well researched and she gets along with everyone.
COMPETENCE
6E1-S522) Process costing has always confused Courtney, an accountant for Murdock Corporation. At the end of the year, she just accepts the bookkeeper's numbers for ending inventory and cost of goods sold even though the bookkeeper does not have formal training in process costing.
COMPETENCE
Tyler struggled through regression analysis in his college courses. Now his manager has asked him to run a regression analysis to create a model for predicting overhead costs. He runs the regression and creates the model. He gives his manager the cost equation for overhead costs, even though he does not really understand it or have any way of checking to see if he did it correctly. Tyler is hesitant to ask for help because he just started this job and he wants to look impressive.
COMPETENCE
6E1-2) Bowes Company operates in a highly competitive environment and has developed some proprietary processes that allow it to maintain a market lead. Franklin, the CFO, does not have employees sign nondisclosure agreements because he feels that they are all family. He avoids talking about the topic.
CONFIDENTIALITY
6E1-S522) At a party, Eric gets carried away with bragging about the production process that he has helped to develop at this company. A party-goer who works for a competitor overhears.
CONFIDENTIALITY
Atwood Mobile operates in a highly competitive environment. Cost information is highly confidential since most jobs are obtained through a bidding process based on variable costing, or in some cases absorption costing. Joshua Gilner is the manager of the Accounting Department of Atwood Mobile. He neglects to talk with his new hires about the confidentiality of data, nor is there a formal policy in place about nondisclosure.
CONFIDENTIALITY
Audrey is an accountant for Simply Green Consulting. At a party, she overhears a man talking about an upcoming contract on which his company will be bidding. She listens closer and hears specific variable cost information that the man shares. She returns to work the next day and shares this competitor's cost information with her friend, who is working on preparing Simply Green Consulting's bid.
CONFIDENTIALITY
6E1-5) Mack, the plant manager, does not disclose the quality issues he is aware of in the current production process. He figures that he can get them resolved in the next few months.
CREDIBILITY
6E1-S522) This quarter, the company switched from using the FIFO method of process costing to the weighted-average method of process costing. Andrew, the chief accountant, did not disclose the change in methods in the reports because he did not want to have to justify the change.
CREDIBILITY
Morgan does not disclose on the financial statements that variable costing, rather than absorption costing, was used.
CREDIBILITY
RQ 15 [6.5-15] An R-Square value of 0.00 indicates a perfect relationship between the volume of activity and the cost being analyzed.
FALSE
RQ 18 [6.1-10] The variable cost per unit of activity increases as activity increases.
FALSE
RQ 22 [6.4-9] The high-low method is theoretically better than regression analysis because the high-low method uses more data points than regression analysis.
FALSE
RQ 9 [6.3-9] Outliers are data points that fall in the same general pattern as the other data points.
FALSE
As the activity level rises and falls, ________ remain constant in total.
Fixed Cost(s)
6E1-1) Alexandria receives an iPad from a salesperson at a lean consulting group. She keeps the iPad, even though she knows that her department will be responsible for selecting a consulting firm to come in to offer lean training sessions next year.
INTEGRITY
6E1-S522) Lauren works in the Accounting Department at Blue Moon Consulting. She does not disclose that one of the companies bidding on a contract to provide payroll services for Blue Moon employs her daughter.
INTEGRITY
The CEO of a small company visits a competitor's dumpster and takes several trash bags containing discarded papers and reports. The CEO directs Brandon to go through the competitor's trash to find any information about the competitor's costs for a contract coming up for bid. Brandon goes through the papers to find the information because he does not want to lose his job.
INTEGRITY
The _______ value is referred to as the "goodness-of-fit" statistic.
R-squared
RQ 13 [6.2-1] Relevant range is the range of activity (volume) over which total fixed costs and variable costs per unit can be assumed to remain the same.
TRUE
________ is equal to the sum of _________ plus ___________
Total Cost(s) = Variable Costs + Fixed Costs
RQ 27 [6.3-16] Using account analysis, what type of cost is the price of gasoline when your car gets 30 miles per gallon and each gallon costs $3.65?
VARIABLE
________ is a method for determining cost behavior that is based on a manager's judgment.
account analysis
_________ is the cost to produce a single unit of production as calculated by dividing the total cost by the total number of units produced.
average cost per unit
__________ are fixed costs that management has little or no control over in the short run.
committed fixed costs
An s-shaped line would represent a
curvilinear cost(s)
The _________ uses two data points to arrive at a cost equation to describe a mixed cost.
high-low method
The total __________ line increases as the volume of activity increases, but the line does not begin at the origin.
mixed cost(s)
RQ 32 [6.2-34] Total mixed cost is represented by which of the following equations?
y = vx + f
