Question;ACTIVITY ANALYSIS,COST ? BEHAVIOUR AND COST ESTIMATION;Multiple Choice Questions;1. The;relationship between cost and activity is termed;A. cost estimation.;B. cost prediction.;C. cost behavior.;D. cost analysis.;E. cost approximation;2. Which;of the following costs changes in direct proportion to a change in the activity;level?;A. Variable cost.;B. Fixed cost.;C. Semivariable cost.;D. Step-variable cost.;E. Step-fixed cost.;3. Montgomery;Company has a variable selling cost. If;sales volume increases, how will the total variable cost and the variable cost;per unit behave?;Total;Variable Cost;Variable;Cost Per Unit;A.;Increase;Increase;B.;Increase;Remain;constant;C.;Increase;Decrease;D.;Remain;constant;Decrease;E.;Decrease;Increase;4. What;type of cost exhibits the behavior that follows?;Manufacturing;Volume (Units);Cost Per Unit;50,000;$1.95;70,000;1.95;A. Variable cost.;B. Fixed cost.;C. Semivariable cost.;D. Discretionary fixed cost.;E. Step-fixed cost;5. Plaza Corporation observed that when 25,000;units were sold, a particular cost amounted to $70,000, or $2.80 per unit. When volume increased by 15%, the cost;totaled $80,500 (i.e., $2.80 per unit).;The cost that Plaza is studying can best be described as a;A. variable cost.;B. fixed cost.;C. semivariable cost.;D. discretionary fixed cost.;E. step-fixed cost.;6. A company observed a decrease in the cost per;unit. All other things being equal;which of the following is probably true?;A. The company is studying a variable cost, and;total volume has increased.;B. The company is studying a variable cost, and;total volume has decreased.;C. The company is studying a fixed cost, and;total volume has increased.;D. The company is studying a fixed cost, and;total volume has decreased.;E. The company is studying a fixed cost, and;total volume has remained constant.;7. Webster;has the following budgeted costs at its anticipated production level (expressed;in hours): variable overhead, $150,000, fixed overhead, $240,000. If Webster now revises its anticipated;production slightly downward, it would expect;A. total fixed overhead of $240,000 and a lower;hourly rate for variable overhead.;B. total fixed overhead of $240,000 and the same;hourly rate for variable overhead.;C. total fixed overhead of $240,000 and a higher;hourly rate for variable overhead.;D. total variable overhead of less than $150,000;and a lower hourly rate for variable overhead.;E. total variable overhead of less than $150,000;and a higher hourly rate for variable overhead.;8. What;type of cost exhibits the behavior that follows?;Manufacturing;Volume (Units);Total;Cost;Cost;Per Unit;50,000;$150,000;$3.00;80,000;150,000;1.88;A. Variable cost.;B. Fixed cost.;C. Semivariable cost.;D. Step-variable cost.;E. Mixed cost.;9. When graphed, a typical variable cost appears;as;A. a horizontal line.;B. a vertical line.;C. a u-shaped line.;D. a diagonal line that slopes downward to the;right.;E. a diagonal line that slopes upward to the;right.;10. Norman;Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the vertical;axis representing per-unit cost and the horizontal axis representing;units sold, how would a line that depicts sales commissions be drawn?;A. As a straight diagonal line, sloping upward;to the right.;B. As a straight diagonal line, sloping downward;to the right.;C. As a horizontal line.;D. As a vertical line.;E. As a curvilinear line.;11. When graphed, a typical fixed cost appears;as;A. a horizontal line.;B. a vertical line.;C. a u-shaped line.;D. a diagonal line that slopes downward to the;right.;E. a diagonal line that slopes upward to the;right.;12. Costs that remain the same over a wide range;of activity, but jump to a different amount outside that range, are termed;A. step-fixed costs.;B. step-variable costs.;C. semivariable costs.;D. curvilinear costs.;E. mixed costs.;13. Straight-line depreciation is a typical;example of a;A. variable cost.;B. step-variable cost.;C. fixed cost.;D. mixed cost.;E. curvilinear cost.;14. Which;of the following choices denotes the typical cost behavior of advertising and;sales commissions?;Advertising;Sales Commissions;A.;Variable;Variable;B.;Variable;Fixed;C.;Fixed;Variable;D.;Fixed;Fixed;E.;Semivariable;Variable;15. Douglas Corporation recently produced and;sold 100,000 units. Fixed costs at this;level of activity amounted to $50,000, variable costs were $100,000. How much cost would the company anticipate if;during the next period it produced and sold 102,000 units?;A. $150,000.;B. $151,000.;C. $152,000.;D. $153,000.;E. Some other amount not listed above.;16. Extron;Inc., has only variable costs and fixed costs.;A review of the company's records disclosed that when 100,000 units were;produced, fixed manufacturing costs amounted to $200,000 and the cost per unit;manufactured totaled $5. On the basis of;this information, how much cost would the firm anticipate at an activity level;of 97,000 units?;A. $485,000.;B. $491,000.;C. $494,000.;D. $500,000.;E. Some other amount not listed above.;17. A review of Parry Corporation's accounting;records found that at a volume of 90,000 units, the variable and fixed cost per;unit amounted to $8 and $4, respectively.;On the basis of this information, what amount of total cost would Parry;anticipate at a volume of 85,000 units?;A. $1,020,000.;B. $1,040,000.;C. $1,060,000.;D. $1,080,000.;E. Some other amount not listed above.;18. Each of Davidson's production managers;(annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing;activity. Thus, if the company has;50,000 hours of manufacturing activity, one manager is needed, for 75,000 hours;two managers are needed, for 125,000 hours, three managers are needed, and so;forth. Davidson's salary cost can best;be described as a;A. variable cost.;B. semivariable cost.;C. step-variable cost.;D. fixed cost.;E. step-fixed cost.;19. A cost that has both a fixed and variable;component is termed a;A. step-fixed cost.;B. step-variable cost.;C. semivariable cost.;D. curvilinear cost.;E. discretionary cost.;20. A mixed cost is often known as a;A. semivariable cost.;B. step-fixed cost.;C. variable cost.;D. curvilinear cost.;E. discretionary cost.;21. Richard;Hamilton has a fast-food franchise and must pay a franchise fee of $35,000 plus;3% of gross sales. In terms of cost;behavior, the fee is a;A. variable cost.;B. fixed cost.;C. step-fixed cost.;D. semivariable cost.;E. curvilinear cost.;22. Which of the following are examples of a;mixed cost?;I.;A;building that is used for both manufacturing and sales activities.;II.;An;employee's compensation, which consists of a flat salary plus a commission.;III.;Depreciation;that relates to five different machines.;IV.;Maintenance;cost that must be split between sales and administrative offices.;A. I only.;B. II only.;C. I and III.;D. I, III, and IV.;E. I, II, III, and IV.;23. Which;of the following costs exhibits both decreasing and increasing marginal costs;over a specific range of activity?;A. Semivariable cost.;B. Curvilinear cost.;C. Step-fixed cost.;D. Step-variable cost.;E. Fixed cost.;24. The relevant range is that range of activity;A. where a company achieves its maximum;efficiency.;B. where units produced equal units sold.;C. where management expects the firm to operate.;D. where the firm will earn a profit.;E. where expected results are abnormally high.;25. Within;the relevant range of activity, costs;A. can be estimated with reasonable accuracy.;B. can be expected to change radically.;C. exhibit decreasing marginal cost patterns.;D. exhibit increasing marginal cost patterns.;E. cannot be estimated satisfactorily.;26. Within;the relevant range, a curvilinear cost function can sometimes be graphed as a;A. straight line.;B. jagged line.;C. vertical line.;D. curved line.;E. horizontal line.;27. As;a firm begins to operate outside the relevant range, the accuracy of cost;estimates for fixed and variable costs;Fixed;Variable;A.;increases;increases;B.;increases;decreases;C.;decreases;increases;D.;decreases;decreases;E.;decreases;remains;unchanged;28. A;variable cost that has a definitive physical relationship to the activity;measure is called a(n);A. discretionary cost.;B. engineered cost.;C. managed cost.;D. programmed cost.;E. committed cost.;29. Costs;that result from an organization's ownership or use of facilities and its basic;organizational structure are termed;A. discretionary fixed costs.;B. committed fixed costs.;C. discretionary variable costs.;D. committed variable costs.;E. engineered costs.;30. Property taxes are an example of a(n);A. committed fixed cost.;B. committed variable cost.;C. discretionary fixed cost.;D. discretionary variable cost.;E. engineered cost.
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