Question 1

Which of the following would be an example of a fixed cost?
A) wages for an assembly line worker
B) electric bill
C) depreciation on equipment
D) materials used

Accepted Answer

Depreciation on equipment is a fixed cost because it is a non-cash expense that remains the same regardless of the level of production or sales. Wages for an assembly line worker and materials used are variable costs because they increase or decrease with the level of production. The electric bill can be either a fixed cost (if it remains the same each month) or a variable cost (if it fluctuates with usage).

Question 2

A factor that causes or leads to a change in a cost or activity is a(n)
A) cost formula.
B) step cost.
C) mixed cost.
D) driver.

Accepted Answer

A factor that causes or leads to a change in a cost or activity is called a driver. A cost formula is a mathematical equation used to calculate a cost. Step cost is a cost that increases in steps as activity levels increase. Mixed cost is a cost that contains both fixed and variable components. Therefore, the best choice is D.

Question 3

Which of the following would be a variable cost for a dentist's office?
A) depreciation on equipment
B) cost of renting office space
C) cost of teeth cleaning material
D) salary of dentist

Accepted Answer

Cost of teeth cleaning material is a variable cost for a dentist's office as it directly varies with the number of patients served. Other options such as depreciation on equipment is a fixed cost, cost of renting office space is a semi-variable cost, and salary of a dentist is a fixed cost.

Question 4

Which of the following would probably be a variable cost at a college?
A) salary of the head janitor
B) cost of registration forms
C) salary of the college president
D) none of these options

Accepted Answer

Variable costs are expenses that change based on the level of production or activity, and typically include things like materials, labor, and utilities. The cost of registration forms would vary with the number of students registering, so it is likely to be a variable cost. The salary of the head janitor and college president, on the other hand, are likely fixed costs as they do not vary with the level of activity.

Question 5

A committed fixed cost
A) can easily be changed.
B) often involves a long-term contract.
C) changes when the level of output changes.
D) all of these are correct

Accepted Answer

A committed fixed cost often involves a long-term contract, which makes it difficult to change. Option A is incorrect because committed fixed costs cannot easily be changed, while option C is incorrect because they do not change with the level of output.

Question 6

The percentage of variability in the dependent variable explained by an independent variable is called the ____________________________________.

Accepted Answer

The answer of The percentage of variability in the dependent...

Question 7

An advantage of the high-low method is that it is ___________.

Accepted Answer

The answer of An advantage of the high-low method is...

Question 8

Which of the following is an example of a discretionary fixed cost?
A) depreciation of equipment
B) advertising costs
C) rental of machinery
D) insurance on automobiles

Accepted Answer

Discretionary fixed costs are costs that are not necessary for the operation of the business but are incurred based on management's discretion. Advertising costs fall under this category as they are not required for the basic operation of the business but are incurred based on management's decision to promote the business. The other options listed are examples of fixed costs but are not discretionary, as they are necessary for the operation of the business.

Question 9

Which of the following would probably be a fixed cost in a fast-food restaurant?
A) cost of hamburger
B) cost of french fries
C) shift manager's salary
D) utility cost

Accepted Answer

The shift manager's salary would likely be a fixed cost, as it is a regular expense that does not vary with the amount of hamburgers, french fries, or utilities used.

Question 10

The spreadsheet regression program supplies more than the estimates of the coefficients; it also provides information that can be used to see how ________ the cost equation is which is a feature not available for the high-low method.

Accepted Answer

The answer of The spreadsheet regression program supplies more than...

Question 11

Per-unit fixed costs
A) can be misleading and lead to poor decisions.
B) stay the same as output changes.
C) decrease as output decreases.
D) increase as output increases.

Accepted Answer

The answer of Per-unit fixed costs
A) can be misleading and...

Question 12

A fixed cost within the relevant range
A) increases in total as output decreases.
B) does not change in total as output changes.
C) decreases in total as output increases.
D) All of these are correct.

Accepted Answer

A fixed cost, by definition, does not change in total as output changes within the relevant range. Therefore, only option B is correct.

Question 13

Which of the following is not an example of a discretionary fixed cost?
A) research and development
B) training costs
C) advertising costs
D) direct materials

Accepted Answer

Direct materials are not a discretionary fixed cost as they are a necessary expense to produce the product or service. Discretionary fixed costs are expenses that are not essential to operations and can be adjusted or eliminated at management's discretion. Research and development, training costs, and advertising costs are all examples of discretionary fixed costs as they are expenses that can be adjusted or cut depending on the company's priorities and goals.

Question 14

Discretionary fixed costs
A) cannot be easily changed.
B) often involve a long-term contract.
C) can be changed relatively easy at management discretion.
D) increase as output increases.

Accepted Answer

Discretionary fixed costs can be changed relatively easily at management discretion. Examples include advertising, research and development, and employee training.

Question 15

Which of the following would not be an example of a fixed cost?
A) glue used to put together tables
B) insurance on factory building
C) depreciation on factory building
D) property taxes

Accepted Answer

Glue used to put together tables is a variable cost as it depends on the number of tables being produced. Fixed costs are expenses that remain constant regardless of the level of production, such as insurance, depreciation, and property taxes.

Question 16

The relevant range
A) is the normal range of output.
B) is the range of output where cost relationships are valid.
C) may change from period to period.
D) All of these are correct.

Accepted Answer

The relevant range refers to the range of activity within which the assumptions about fixed and variable costs are valid. It is indeed the normal range of output (A), the range where cost relationships (such as fixed and variable cost behaviors) are valid (B), and it can change over time due to various factors such as changes in production capacity or market conditions (C). Therefore, all of these statements are correct.

Question 17

Which of the following would probably be a discretionary fixed cost for a law firm?
A) salary of receptionist
B) advertising
C) depreciation on furniture and equipment
D) cost of legal forms

Accepted Answer

Discretionary fixed costs are those expenses that a business chooses to incur, but they are not essential for the operation of the business. Advertising is an expense that a law firm may choose to incur in order to attract new clients, but it is not an essential cost. Therefore, advertising is likely to be a discretionary fixed cost for a law firm. The other options are not discretionary fixed costs because they are either necessary for the operation of the law firm (salary of receptionist and cost of legal forms) or a required expense related to fixed assets (depreciation on furniture and equipment).

Question 18

Total variable costs
A) increases as output increases.
B) decreases as output decreases.
C) equal a variable rate * amount of output.
D) all of these are correct.

Accepted Answer

Total variable costs change with the level of output, increasing as output increases and decreasing as output decreases. This is consistent with the definition of variable costs, which vary with the level of production or activity.

Question 19

Variable costs within the relevant range
A) stay constant on a per unit basis as output changes.
B) increase in total as output increases.
C) decrease in total as output decreases.
D) All of these are correct.

Accepted Answer

Variable costs stay constant on a per unit basis, but their total increases with increased output and decreases with decreased output, within the relevant range.

Question 20

Knowing how costs change as output changes is essential to
A) planning and controlling.
B) controlling and decision making.
C) planning, controlling and decision making.
D) None of these are correct.

Accepted Answer

Knowing how costs change as output changes is important for all three functions: planning, controlling, and decision making. Planning involves forecasting future costs and determining optimal levels of productivity. Controlling requires monitoring actual costs and comparing them to planned costs in order to adjust operations as necessary. Decision making involves using cost information to make informed choices about production levels, pricing, and other strategic decisions.

Quiz 3: Cost Behavior

Which of the following would be an example of a fixed cost?

A factor that causes or leads to a change in a cost or activity is a(n)

Which of the following would be a variable cost for a dentist's office?

Which of the following would probably be a variable cost at a college?

A committed fixed cost

The percentage of variability in the dependent variable explained by an independent variable is called the ____________________________________.

An advantage of the high-low method is that it is ___________.

Which of the following is an example of a discretionary fixed cost?

Which of the following would probably be a fixed cost in a fast-food restaurant?

The spreadsheet regression program supplies more than the estimates of the coefficients; it also provides information that can be used to see how ________ the cost equation is which is a feature not available for the high-low method.

Per-unit fixed costs

A fixed cost within the relevant range

Which of the following is not an example of a discretionary fixed cost?

Discretionary fixed costs

Which of the following would not be an example of a fixed cost?

The relevant range

Which of the following would probably be a discretionary fixed cost for a law firm?

Total variable costs

Variable costs within the relevant range

Knowing how costs change as output changes is essential to