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Acctg 202
Chapter 7 Examination


Choose the best answer. 

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. 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. 

4. 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. 

5. 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. 

6. 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. 

7. The nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the: 
A) least-squares regression method. 
B) high-low method. 
C) visual-fit method. 
D) account analysis method. 
E) multiple regression method. 

8. Which of the following is not an issue in the collection of data for cost estimation? 
A) Outliers. 
B) Missing data. 
C) Mismatched time periods. 
D) The effects, over time, of inflation and the learning (i.e., efficiency improvement) that takes place in repetitive tasks. 
E) All of the above are issues in data collection. 

Use the following fact pattern for questions 9 & 10.  Atlanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year:

Month Utilities Machine Hours
January

$8,700

800

February

$8,360

720

March

$8,950

810

April

$9,360

920

May

$9,625

950

June

$9,150

900

9. The fixed utilities cost per month is: 
A) $3,764. 
B) $4,400. 
C) $4,760. 
D) $5,100. 
E) an amount other than those listed above. 

10. Using the high-low method, the utilities cost associated with 980 machine hours would be: 
A) $9,510. 
B) $9,660. 
C) $9,700. 
D) $9,790. 
E) an amount other than those listed above.

Key

  1. C
  2. A
  3. A
  4. C
  5. C
  6. B
  7. C
  8. E
  9. B
  10. D

 

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