# Chapter M5 Accounting

25 Questions  Settings  Related Topics
• 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