Chapter 1 McGraw SmartBook

How individual cost react to changes in activity level is referred to as cost ____.

behavior

When using the high-low method, the slop of the line equals the ____ cost per unit of activity.

variable

A fixed cost remains fixed ____ within the relevant range of activity. a. per unit b. in total

b. in total

Discretionary fixed costs include: (select all that apply) a. advertising b. management training programs c. insurance expense d. factory depreciation

a and b

Step-variable costs: (select all that apply) a. can be adjusted quickly as conditions change b. may include total salaried employee expense c. are generally treated as fixed costs

a and b

Using the high-low method, the fixed cost is calculated: (select all that apply) a. after the variable cost per unit is calculated b. before the variable cost is calculated c. by adding the total cost to the variable cost d. using either the high or low level of activity

a and b

Which of the following statements are true? a. A mixed cost has a minimum cost of having a service available and ready for use. b. When mixed costs are represented by a straight-line, the steeper the slope, the higher the variable cost per unit. c. The fixed portion of a mixed cost represents the cost incurred for the actual consumption of a service. d. The equation for a straight-line makes it easy to calculate the total mixed cost for any activity level outside the relevant range.

a and b

Within the relevant range of activity, variable costs: (select all that apply) a. remain constant per unit b. vary in total c. vary per unit d. remain constant in total

a and b

A dress manufacturer would consider the cost of relatively inexpensive items like thread to the part of: (select all that apply) a. indirect materials b. direct materials c. manufacturing overhead d. administrative costs

a and c

An activity base: (select all that apply) a. measures whatever causes costs to vary b. is a measure of whatever causes fixed costs to occur c. is sometimes called a cost driver d. is part of the organization where major operations are planned and carries out

a and c

Prime cost are: (select all that apply) a. direct materials b. manufacturing overhead c. selling and administrative expenses d. direct labor

a and d

Which of the following statements are true? (select all that apply) a. Sales commissions are period costs. b. The wages of assembly-line workers are period costs. c. Period costs are included as part of the cost of goods. d. Period costs are expensed in the same period in which they are incurred.

a and d

Which of the following are most likely fixed costs? (select all that apply) a. Administrative salaries b. Factory insurance c. Factory rent d. Electricity to operate factory machines

a, b, and c

Selling costs include: (select all that apply) a. advertising b. sales salaries c. administrative salaries d. sales commissions

a, b, and d

Fixed costs: (select all that apply) a. generally include rent and supervisor salaries b. per unit become progressively larger as the level of activity increases c. should not be expressed on a per unit basis when making decisions d. remain constant in total regardless of changes in activity

a, c, and d

Manufacturing costs include: (select all that apply) a. direct labor b. administrative costs c. manufacturing overhead d. selling costs e. direct materials

a, c, and e

True or false: Assembly-line workers' wages are period costs. a. False b. True

a. False

Costs that are shared by multiple cost objects in a company are known as ____ costs. a. common b. marginal c. sunk d. opportunity

a. common

Direct labor and overhead costs incurred to change raw materials into finished products are known as ____ costs. a. conversion b. period c. opportunity d. prime

a. conversion

A laptop computer manufacturer would consider the computer's processor ship to be a(n) ____ cost. a. direct material b. direct labor c. indirect material d. manufacturing overhead

a. direct material

Within the relevant range of activity, ____ costs remain constant in total. a. fixed b. neither fixed nor variable c. both fixed and variable d. variable

a. fixed

Manufacturing overhead costs include: a. indirect materials, factory supervisors' salaries, and factory depreciation b. direct materials, administrative taxes and insurance, and sales commissions c. direct materials, sales commissions, and factory assembly workers' wages d. administrative taxes and insurance, sales commissions, and factory assembly workers' wages

a. indirect materials, factory supervisors' salaries, and factory depreciation

The rise-over run formula for the slope of a line is the basis of: a. the high-low method b. a scattergraph c. least square regression

a. the high-low method

A cost that changes in direct proportion to changes in the activity level is a ____ cost. a. variable b. mixed c. fixed

a. variable

The slope (b) of the regression line represents the ____ cost per unit of activity. a. variable b. total c. fixed

a. variable

Product costs: (select all that apply) a. include all costs involved in making and selling a product b. are also called inventoriable costs c. "attach" to units of product as they are purchased for resales or produced d. are always expensed in the same period in which the related products are produced

b and c

Which of the following statements are true? (select all that apply) a. all costs in a merchandising company are period costs. b. Product costs are also called inventorial costs. c. Period costs are expensed when incurred. d. Inventoriable costs are expensed in the period in which they are incurred.

b and c

Which statements regarding the high-low method are true? (select all that apply) a. When applying this method, use the points with the highest and lowest level of cost. b. The high-low method should be used if a scattergraph plot indicates a linear relationship between cost and activity. c. It only uses two data points d. it is superior to least-squares regression.

b and c

Which of the following statements are true? (select all that apply) a. Factory cleaning and maintenance and period costs. b. Direct labor and indirect labor are product costs c. Sales commissions and shipping costs are product costs. d. Advertising and sales commissions are period costs.

b and d

Common activity bases include: (select all that apply) a. scrapped units b. direct labor hours c. units sold d. machine hours

b, c, and d

Which of the following is not a method used to estimate the fixed and variable portions of mixed costs? a. High-low method b. Relevant range analysis c. Scattergraph plot d. Engineering approach

b. Relevant range analysis

True or false: Presenting fixed costs on an average per unit basis makes them look like they are variable costs. a. False b. True

b. True

Cost behavior is considered linear whenever: a. the difference between cost and activity is zero b. a straight line approximates the relationship between cost and activity c. a straight line approximates the difference between cost and activity d. the relationship between cost and activity cannot be represented by a line

b. a straight line approximates the relationship between cost and activity

The variable cost per unit using the high-low method is calculated as: a. y= a + bX b. change in cost divided by change in units (activity) c. total cost minus total fixed cost d. change in units (activity) divided by change in costs

b. change in cost divided by change in units (activity)

The high-low method: (select all that apply) a. generally provides an accurate estimate of true cost behavior during the normal periods b. is based on periods where the activity tends to be unusual c. is difficult to apply and requires a statistical software package d. uses only two data points

b. is based on periods where the activity tends to be unusual c. uses only two data points

A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called: a. the contribution approach b. least-squares regression c. high-low d. the engineering approach

b. least-squares regression

Factory materials, such as cleaning supplies, that are not components of finished products are classified as: a. administrative costs b. manufacturing overhead c. direct materials d. period costs

b. manufacturing overhead

Committed fixed costs include: (select all that apply) a. public relations b. research c. top management salaries d. real estate taxes

c and d

When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity: a. choose the period with the highest and lowerst level of cost and their associated activities. b. skip that period and move to the next highest or lowest level where cost and activity match. c. choose the period with the highest and lowest level of activity and their associated costs.

c. choose the periods with the highest and lowest level of activity and their associated costs.

Direct materials and direct labor are both: a. selling and administrative costs b. period costs c. manufacturing costs d. nonmanufacturing costs

c. manufacturing costs

When using account analysis, an account is classified as either fixed or variable based on: a. engineering estimates of production methods b. scattergraphs c. the analyst's prior knowledge of how the cost behaves d. the equation Y = a + bX

c. the analyst's prior knowledge of how the cost behaves

Fixed costs that cannot easily be changed and often lock a company into a multi-year decision are ____ fixed costs.

committed

Any item for which cost data is desired is called a(n) ____ ____.

cost object

Contribution margin is: a. sales revenue minus cost of goods sold b. all revenues minus all costs c. sales revenues minus fixed costs d. sales revenue minus variable costs

d. sales revenue minus variable costs

Cost that can easily and conveniently traced to a specific product are called ____ costs. a. indirect b. direct c. period

direct

Materials that become an important component of the finished product and their cost can be easily and conveniently traced to the finished product are ____ materials.

direct

In automobile manufacturing plant, the assembly-line workers are considered to be ____ ____.

direct labor

A cost can be easily and conveniently traced to a specific cost object is a(n) ____ cost of that cost object, whereas costs that cannot be easily and conveniently traced to that specific cost object are ____ cost.

direct, indirect

Fixed costs that can be cut-back or eliminated without significant damage to a company's long-term goals are ____ fixed cost and ____ fixed cost can not be easily changed or eliminated.

discretionary, committed

In a least-squares regression line, the vertical intercept (a) of the line represents the total ____ cost.

fixed

Salaries of factory supervisors and factory maintenance personnel are examples of ____ labor costs.

indirect

Costs expensed on the income statement when incurred are ____ cost and ____ costs become part of inventory on the balance sheet.

period, inventoriable

Inventoriable costs is another term for ____ costs.

product

The level of activity within which variable and fixed cost assumptions are valid is known as the ____ ____.

relevant range

High-low or least squares regression analysis should only be done if a(n) ____ plot depicts linear cost behavior.

scattergraph

Period costs are always expensed on the income statement in the period in which: a. they are incurred b. the related goods are sold c. the cash for the expense changes hands

they are incurred

Fixed costs remain constant in ____ over the ____ range of activity.

total, relevant

Mixed costs are also commonly known as semi-____ costs.

variable