25 Questions

Questions and Answers

- 1.Based on the information in Table M5-2, assuming Laramie Tack & Saddle uses the high-low method to separate mixed costs, if the company processes 4,100 packages during July, the total
__variable cost__will be:- A.
$3,960

- B.
$2,952

- C.
$2,665

- D.
$6,601

- 2.What is the amount of fixed cost per sales dollar using the high-low method?
- A.
$152,500

- B.
$30,000

- C.
$22,500

- D.
$450,000

- 3.Using the high-low method, what is the amount of salesperson’s earnings if the sales are $2,750,000?
- A.
$163,750

- B.
$175,00

- C.
$167,500

- D.
$160,000

- 4.Instead of plotting mixed cost data manually:
- A.
The high-low method can be used to automatically plot the data

- B.
Excel can be used

- C.
Microsoft DataGraph can be used

- D.
None of these answers is correct.

- 5.Which of the following is an example of a variable cost related to sales activity?
- A.
Direct material

- B.
Sales commissions

- C.
Sales salaries

- D.
Monthly retail store rent

- 6.The engineering approach to cost identification relies heavily on the use of:
- A.
Technical experts and professionals

- B.
Visual graphs

- C.
Mathematical equations

- D.
Formulas

- 7.Which of the following is not an example of a fixed cost?
- A.
Depreciation on a factory building

- B.
Factory insurance cost

- C.
Monthly store rent

- D.
All of these answers are examples of fixed costs.

- 8.The method used to separate mixed costs that uses only two data points (even if more reliable points are available) is called:
- A.
The engineering approach

- B.
Regression analysis

- C.
Scatter graphing

- D.
The high-low method

- 9.Based on the information in Table M5-4, the total cost of operating the purchasing department if 1,500 purchase orders are processed would be about:
- A.
$60,000

- B.
$110,000

- C.
$100,000

- D.
The cost cannot be determined from the information on the chart.

- 10.The method used to separate the components of mixed cost which focuses on the mathematical differences between the two extremes of observations is called:
- A.
The high-low method

- B.
The engineering approach

- C.
Scatter graphing

- D.
Regression analysis

- 11.A drawback to using the high-low method is that this method is based on:
- A.
Costs

- B.
Only two data points at opposite extremes

- C.
Mathematical calculations

- D.
Activity

- 12.When the scatter graph method is compared with the high-low method, the fixed and variable costs will be:
- A.
Extremely different

- B.
Somewhat different

- C.
Identical

- D.
None of these answers is correct.

- 13.An accountant would use which formula to find the amount of variable costs?
- A.
Total costs / fixed costs

- B.
Fixed costs / total costs

- C.
Fixed costs – variable costs

- D.
Total costs – fixed costs

- 14.A cost that does not change as the level of business activity changes is a:
- A.
Variable cost

- B.
Mixed cost

- C.
Fixed cost

- D.
Semi-variable cost

- 15.The most mathematically complex method used for separating mixed costs is:
- A.
Engineering approach

- B.
Regression analysis

- C.
Scatter graphing

- D.
High-low method

- 16.In the basic mathematical regression equation, the
*X*represents:- A.
Unit variable cost

- B.
Activity level

- C.
Fixed cost

- D.
Total cost

- 17.Fixed costs are costs that __________ in total, but __________ as the business activity level changes.
- A.
Remain constant; change per unit

- B.
Change; remain fixed per unit

- C.
Fluctuate; are relatively stable

- D.
None of these answers is correct.

- 18.Activities that are outside of the relevant range:
- A.
Only affect fixed costs in a business setting

- B.
Can still affect costs in a business setting

- C.
Only impact variable costs in a business setting

- D.
Do not affect costs in a business setting

- 19.In the basic mathematical regression equation, the
*Y*represents:- A.
Unit variable cost

- B.
Total cost

- C.
Fixed cost

- D.
Activity level

- 20.An equation used to determine the components of mixed cost is:
- A.
Mixed cost = total cost – variable cost

- B.
Total mixed cost = fixed cost element – variable cost element

- C.
Total cost = fixed cost + variable cost

- D.
Total mixed cost = fixed cost element + variable cost element

- 21.The reaction of costs to changes in levels of business activity is called:
- A.
Semi-variable cost tracking

- B.
Marketing mix

- C.
Managerial decision behavior

- D.
Cost behavior

- 22.The information from Table M5-2 for applying the high-low method should come from the months of:
- A.
April and June

- B.
May and June

- C.
February and April

- D.
February and May

- 23.Based on the information in Table M5-1, the types of cost that would be considered a mixed cost for Horse & Buggy would be:
- A.
C and E

- B.
E and F

- C.
C, D, and E

- D.
C and F

- 24.When a cost no longer holds to its cost behavior pattern, the activity may be:
- A.
A mixed cost

- B.
An indeterminable cost

- C.
A fixed cost

- D.
Outside the relevant range

- 25.__________ costs change in total proportionately with changes in the level of business activity.
- A.
Frozen

- B.
Fixed

- C.
Mixed

- D.
Variable