0% found this document useful (0 votes)
4K views6 pages

Mas 3

This document discusses concepts related to cost analysis and classification. It provides multiple choice questions and answers on topics such as: - Methods of cost estimation like scatter diagram and regression analysis - Classifying costs as fixed, variable, committed, avoidable, and discretionary - Identifying cost drivers and cost pools - Calculating variable overhead and total fixed overhead costs - Distinguishing value-adding from non-value-adding costs - Using cost-volume-profit analysis and contribution margin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
4K views6 pages

Mas 3

This document discusses concepts related to cost analysis and classification. It provides multiple choice questions and answers on topics such as: - Methods of cost estimation like scatter diagram and regression analysis - Classifying costs as fixed, variable, committed, avoidable, and discretionary - Identifying cost drivers and cost pools - Calculating variable overhead and total fixed overhead costs - Distinguishing value-adding from non-value-adding costs - Using cost-volume-profit analysis and contribution margin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 6

CHAPTER3:COSTANALYSIS

MultipleChoices

b1.Theprincipaladvantageofthescatterdiagrammethodoverthehighlowmethodofcostestimationisthat
thescatterdiagrammethod
a.includescostsoutsidetherelevantrange.
b.considersmorethantwopoints.
c.canbeusedwithmoretypesofcoststhanthehighlowmethod.
d.givesaprecisemathematicalfitofthepointstotheline.
a2.Themajorobjectiveofpreparingascatterdiagramisto
a.deriveanequationtopredictfuturecosts.
b.performregressionanalysisontheresults.
c.determinetherelevantrange.
d.findthehighandlowpointstouseforthehighlowmethodofestimatingcosts.
d3.Thecostestimationmethodthatgivesthemostmathematicallyprecisecostpredictionequationis
a.thehighlowmethod.
b.thescatterdiagrammethod.
c.thecontributionmarginmethod.
d.regressionanalysis.
c4.Whichcostismostlikelytobemixedforamanufacturer?
a.Rawmaterials.
b.Directlabor.
c.Manufacturingoverhead.
d.Insurance.
b5.Whichcombinationofobjectofcostandclassificationofcostismostreasonable?
ObjectofCostClassificationofCost

a.MaterialsusedtomakeproductsDiscretionaryfixedcost
b.AdvertisingcostDiscretionaryfixedcost
c.StraightlinedepreciationVariablecost
d.President'ssalaryAvoidablefixedcost
c6.Acostisvariableifitvarieswiththe
a.numberofunitsmanufactured.
b.numberofunitssold.
c.levelofsomeactivity.
d.sellingpriceoftheproduct.
d7.Anonvalueaddingcostis
a.usuallydirecttoaproduct.
b.thesameasadiscretionarycost.
c.unavoidable.
d.notessentialtomanufacturingaproduct.
a8.Fixedcoststhatcannotbereducedwithinashortperiodoftimeare
a.committed.
b.variable.
c.avoidable.
d.unnecessary.
b9.Whichcostismostlikelytobecommitted?
a.Repairsandmaintenance.
b.Sumoftheyears'digitsdepreciationonthefactorybuilding.
c.Feeforaconsultantonthecompany'slongrangeplanning.
d.Advertising.
a10.RST'saveragecostperunitisthesameatalllevelsofvolume.Whichofthefollowingistrue?
a.RSTmusthaveonlyvariablecosts.
b.RSTmusthaveonlyfixedcosts.
c.RSTmusthavesomefixedcostsandsomevariablecosts.
d.RST'scoststructurecannotbedeterminedfromthisinformation.
b11.Amixedcost
a.increasesinstepsasvolumeincreases.
b.containsafixedcomponentandavariablecomponent.
c.varieswithmorethanonemeasureofvolume.
d.cannotbeaccuratelypredicted.
b12.Anonvalueaddingactivity
a.cannotbeacostdriver.
b.shouldbeeliminated.
c.usuallydrivesonlyvariablecosts.
d.cannotusuallybeobservedbymanagers.
d13.Acostpredictingequationdeterminedthroughregressionanalysis
a.alwaysgivesclosepredictions.
b.willnotworkanybetterthanoneobtainedusingthehighlowmethod.
c.canbeusedonlyforcoststhatvarywithsalesorproduction.
d.couldbeseverelyaffectedbyoutliers.
b14.WhichofthefollowingdoJIToperationstrytoeliminate?
a.Discretionaryfixedcosts.
b.Nonvalueaddingcosts.
c.Avoidablecosts.
d.Directcosts.

d15.ABCCompanybreaksevenat$600,000salesandearns$60,000at$700,000sales.Whichofthefollowingis
true?
a.Fixedcostsare$40,000.

10

b.Profitatsalesof$800,000wouldbe$160,000.
c.Thesellingpriceperunitis$6.
d.Contributionmarginis60%ofsales.

b16.Aseasonalbusinessthatsetssellingpricesat20%aboveaveragecostfortheprecedingmonthwill
a.bebetteroffifitcloseddownduringtheoffseason.
b.chargehigherpricesintheoffseasonthaninthebusyseason.
c.alwayschargehigherpricesthanitscompetitors.
d.makeaconsistentreturnonsalesof20%.

b17.Thecomponentsofmanufacturingcostare
a.variablecosts,fixedcosts,andoverheadcosts.
b.materials,directlabor,andoverhead.
c.purchases,wages,andmanufacturingoverhead.
d.wagesandsalaries,maintenanceandrepairs,utilities,anddepreciation.

b18.Whichstatementistrueforamanufacturer?
a.Itcannotusethecontributionmarginformatoftheincomestatement.
b.Manycostsvarywithproductionactivities,notwithsales.
c.Theconceptsoffixedandvariablecostsdonotapply.
d.Costvolumeprofitanalysisisnotappropriate.
d19.Fixedcoststhatmanagerscanchangeonshortnoticeare
a.valueaddingcosts.
b.variablecosts.
c.unavoidablecosts.
d.discretionarycosts.
c20.A(n)__________relationshipisonethatappearstoexisteventhoughthereisnocausalrelationship.
a.Correlation.
b.Outlier.
c.Spurious.
d.Valueadded.
c21.Identifyingcostdrivers
a.isnotnecessarywithregressionanalysis.
b.isthesameasidentifyingcostpools.
c.isanimportantpartofcostmanagement.
d.isusefulonlywithstepvariablecosts.
d22.Acostpoolis
a.allofthecostsofaparticulardepartment.
b.allcostsinagroupsuchasvariablecostsordiscretionaryfixedcosts.
c.allcostsrelatedtoaproductorproductline.
d.allcoststhathavethesamedriver.
b23.Asvolumeincreases,
a.totalfixedcostsremainconstantandperunitfixedcostsincrease.
b.totalfixedcostsremainconstantandperunitfixedcostsdecrease.
c.totalfixedcostsremainconstantandperunitfixedcostsremainconstant.
d.totalfixedcostsincreaseandperunitfixedcostsincrease.

d24.WhichcostisNOTsubtractedfromsellingpriceto
calculatecontributionmarginperunit?
a. Variablemanufacturingoverhead.
b.Variablesellingexpenses.
c.Directlabor.
d.Fixedmanufacturingoverhead.

c25.Acommittedfixedcost
a.canneverbeeliminated.
b.canbeeliminatedintheshorttermandinthelongterm.
c.canbeeliminatedinthelongterm,butnotintheshortterm.
d.canbeeliminatedintheshortterm,butnotinthelongterm.

c26.Avoidablecostsareusually
a.committed.
b.common.
c.direct.
d.fixed.

a27.Directcostsare
a.associatedwithaspecificactivity.
b.alwaysvariable.
c.usuallycommitted.
d.usuallydiscretionary.
c28.Discretionarycosts
a.areusuallyunavoidable.
b.arenotnecessaryforsuccessfuloperations.
c.canbeeitherdirectorindirect.
d.shouldbethefirstonescutinacostreductionprogram.

a29.OgdenCompanyhad$300,000overheadcostat20,000machinehours,$320,000overheadcostat25,000hours.
Variableoverheadcostpermachinehouris
a.$4.00.
b.$12.80.
c.$15.00.
d.someothernumber.

b30.SacramentoCompanyhad$400,000overheadcostat50,000machinehoursand$460,000overheadcostat60,000
hours.Totalfixedoverheadis
a.$60,000
b.$100,000
c.$120,000.

11

d.$320,000.

d31.WhichcostisLEASTlikelytobediscretionary?
a.Salariesofsalespeople.
b.Advertising.
c.Buildingmaintenance.
d.Insurance.

a32.WhichcostisLEASTlikelytobedirecttoaparticularproduct?
a.Salariesofsalespeoplewhosellallofthecompany'sproducts.
b.Advertisingoftheproduct.
c.Licensefeespaidtothedesigneroftheproduct.
d.Costofmaterialsusedtomaketheproduct.

c33.Whichcostismostlikelytobeavoidableindecidingwhethertoshutdownoneofthefourassemblylines
inafactory?
a.Depreciationonthefactorybuilding.
b.Salariesofmaintenanceworkerswhoserviceallassemblylines.
c.Powerusedtooperateequipmentontheassemblyline.
d.Heatandlightforthebuilding.
c34.DSPCompanyearned$100,000onsalesof$1,000,000.Itearned130,000onsalesof$1,100,000.Variable
costsasapercentageofsalesare
a.30%.
b.40%.
c.70%.
d.90%.

b35.DSPCompanyearned$100,000onsalesof$1,000,000.Itearned$130,000onsalesof$1,100,000.Total
fixedcostsare
a.$0.
b.$200,000.
c.$420,000.
d.$900,000.
c36.Predictingcostsatactivitylevelsthatareoutsidetherelevantrangeiscalled
a.association.
b.correlation.
c.extrapolation.
d.noneoftheabove.

a37.Anonvalueaddingcost
a.isdrivenbyanonvalueaddingactivity.
b.isdiscretionary.
c.isdirecttoaproduct.
d.allowsthecompanytochargeahigherpricefortheproduct.
b38.Lookingatthefollowingscatterdiagramswecanconcludethat
$$
|**|**
|***|***
|****|**
|**|**
||
||
|__________________|__________________
activityactivity
CostACostB
a.costAwillbeeasiertopredictthancostB.
b.costBwillbeeasiertopredictthancostA.
c.costAisoutofcontrol.
d.costBhasnofixedcomponent.
b39.MNOhasabreakevenpointof200,000unitsandearnsa$100,000profitatsalesof250,000units.Which
ofthefollowingistrue?
a.Fixedcostsare$100,000.
b.Totalcontributionmarginat200,000unitsis$400,000.
c.Profitatsalesof300,000unitsis$120,000.
d.Sellingpriceperunitis$2.
a40.Theclosenessoftherelationshipbetweenthecostandtheactivityiscalled
a.correlation.
b.spurious.
c.regressionanalysis.
d.manufacturingoverhead.
d41.Rsquaredisameasureof
a.thespuriousrelationshipbetweencostandactivity.
b.thefixedcostcomponent.
c.thevariablecostperunitofactivity.
d.howwelltheregressionlineaccountsforthechangesinthedependentvariable.
c42.DJHhasanaverageunitcostof$20at20,000unitsand$13.75at40,000units.Whatisthevariablecost
perunit?
a.$5.00
b.$6.25
c.$7.50
d.Anamountthatcannotbedeterminedwithoutmoreinformation.
b43.DJHhasanaverageunitcostof$20at20,000unitsand$13.75at40,000units.Whatisthetotalfixed
cost?
a.$125,000
b.$250,000
c.$400,000

12

d.Anamountthatcannotbedeterminedwithoutmoreinformation.
a44.GMHCompanyhad$200,000overheadcostat25,000machinehoursand$240,000overheadcostat60,000hours.
Variableoverheadpermachinehouris
a.$4.00.
b.$1.00.
c.$0.83.
d.someothernumber.
d45.ElmwoodCompanyhad$300,000overheadcostat40,000machinehours,and$360,000overheadcostat60,000
hours.Totalfixedoverheadis
a.$36,000
b.$40,000
c.$60,000.
d.$180,000.
b46.CrookstonCompanybreaksevenat$300,000salesandearns$40,000at$400,000sales.Whichofthe
followingistrue?
a.Fixedcostsare$120,000.
b.Profitatsalesof$500,000wouldbe$50,000.
c.Thesellingpriceperunitis$4.
d.Contributionmarginis10%ofsales.

a47.Glenwoodhasanaverageunitcostof$45at20,000unitsand$25at60,000units.Whatisthevariable
costperunit?
a.$15
b.$20
c.$35
d.Anamountthatcannotbedeterminedwithoutmoreinformation.
b48.Glenwoodhasanaverageunitcostof$45at20,000unitsand$25at60,000units.Whatisthetotalfixed
cost?
a.$400,000
b.$600,000
c.$900,000
d.Anamountthatcannotbedeterminedwithoutmoreinformation.
b49.OsceolaCompanyearned$50,000onsalesof$400,000.Itearned$70,000onsalesof$450,000.Contribution
marginasapercentageofsalesis
a.30%.
b.40%.
c.60%.
d.70%.

c50.OsceolaCompanyearned$50,000onsalesof$400,000.Itearned$70,000onsalesof$450,000.Totalfixed
costsare
a.$0.
b.$50,000.
c.$110,000.
d.$180,000.

TrueFalse
F1.Themajorvariablecostinamanufacturingcompanyisfactoryoverhead.

T2.Ininterpretingregressionresults,thehigherthecorrelation,thebettercostpredictionsarelikelyto
be.

F3.Discretionarycostsarestepvariable.

F4.Discretionaryfixedcostsarenotnecessarytosuccessfuloperationofthebusiness.

T5.Highlow,scatterdiagram,andregressionanalysisaremethodsofdevelopingformulastopredictmixed
costs.
F6.Asvolumeincreases,theperunitamountofamixedcostincreases.

T7.Indevelopingacostpredictionequationusingregressionanalysis,youmightnotselecttheonewiththe
highestcorrelation.
F8.Acompanyusingactivitybasedcostingneednotdoregressionanalysisorscatterdiagrams.
F9.Anrsquaredof.91witharegressionequationmeansthatpredictionswillbeaccurate91%ofthetime.
T10.Amultipleregressionequationusesmorethanonedrivertopredictcosts.

Problems
1.CarlsonCompanyincurred$170,000inoverheadcostsmaking12,000unitsinMarch.Itmade15,000unitsand
incurred$188,000inoverheadcostsinApril.

a.Computethevariablecomponentofoverheadcost.
b.Findthefixedfactorofoverheadcost.

SOLUTION:
a.$6[($188,000$170,000)/(15,00012,000)]
b.$98,000[$170,000(12,000x$6),or$188,000(15,000x$6)]

2.ThestatisticianofRST,Inc.hasdevelopedthefollowingcostpredictionequation,usingobservationsfrom

13

12,000to30,000machinehours.
Y=$236,837+$3.7625X,rsquared=.81,standarderror=$24,363
Y=totalmaintenancecost,X=machinehours
a.Findthepredictedmaintenancecostat25,000machinehours.
b.Willmaintenancecostatzeromachinehoursbe$236,837?yesnoCirclethecorrectanswer.
c.About68%ofthetime,maintenancecostshouldbewithinwhatamountofthepredictedvalue?

SOLUTION:
a.$330,900($236,837+$3.7625x25,000)
b.No,zeroisoutsidetherelevantrange.
c.$24,363,thestandarderror

3.GennerCompanyearned$125,000onsalesof$750,000.Itearned$225,000onsalesof$1,000,000.
a.Findthevariablecostsasapercentageofsales.
b.Findthetotalfixedcosts.

SOLUTION:
a.60%{1[($225,000$125,000)/($1,000,000$750,000)]}
b.$175,000[$1,000,000x(160%)$225,000]

4.Dannerhasanaverageunitcostof$22.50atavolumeof400,000units.At500,000unitstheaverageunit
costis$20.50.
a.Computethevariablecostperunit.
b.Computethetotalfixedcost.

SOLUTION:
a.$12.50{[($20.50x500,000)($22.50x400,000)]/(500,000400,000)}
b.$4,000,000($9,000,000$12.50x400,000)

5.TriCountyCompanyincurred$175,000inoverheadcostsmaking40,000unitsinApril.Itmade24,000unitsand
incurred$147,000inoverheadcostsinMay.

a.Computethevariablecomponentofoverheadcost.
b.Findthefixedfactorofoverheadcost.

SOLUTION:
a.$1.75[($175,000$147,000)/(40,00024,000)]
b.$105,000[$147,000(24,000x$1.75),or$175,000(40,000x$1.75)]

6.BilboCompanyincurred$374,000inoverheadcostsmaking11,000unitsinNovember.Itmade7,500unitsand
incurred$325,000inoverheadcostsinDecember.

a.Computethevariablecomponentofoverheadcost.
b.Findthefixedfactorofoverheadcost.

SOLUTION:
a.$14[($374,000$325,000)/(11,0007,500)]
b.$220,000[$325,000(7,500x$14),or$374,000(11,000x$14)]

7.ThestatisticianofComstock,Inc.hasdevelopedthefollowingpredictionequationforcosts,using
observationsfrom25,000to60,000machinehours.
Y=$146,374+$4.892X,rsquared=.86,standarderror=$28,638
Y=totalrepaircost,X=machinehours
a.Findthepredictedrepaircostat50,000machinehours.
b.Willrepaircostatzeromachinehoursbe$146,374?yesnoCirclethecorrectanswer.
c.About68%ofthetime,repaircostshouldbewithinwhatamountofthepredictedvalue?

14

SOLUTION:
a.$390,974($146,374+$4.892x50,000)
b.No,zeroisoutsidetherelevantrange.
c.$28,638,thestandarderror

8.ScooterCompanyearned$150,000onsalesof$1,000,000.Itearned$330,000onsalesof$1,400,000.
a.Findthecontributionmarginratio.
b.Findthetotalfixedcosts.

SOLUTION:
a.45%($330,000$150,000)/($1,400,000$1,000,000)
b.$300,000[$1,000,000x45%)$150,000]

9.Benncohasanaverageunitcostof$18.50atavolumeof100,000units.At200,000unitstheaverageunit
costis$14.25.
a.Computethevariablecostperunit.
b.Computethetotalfixedcost.

SOLUTION:
a.$10.00{[($14.25x200,000)($18.50x100,000)]/(200,000100,000)}
b.$850,000($2,850,000$10x200,000)

10.ParsonsCompanyincurred$475,000inoverheadcostsmaking40,000unitsinAugust.Itmade30,000unitsand
incurred$447,000inoverheadcostsinSeptember.

a.Computethevariablecomponentofoverheadcost.
b.Findthefixedfactorofoverheadcost.
SOLUTION:
a.$2.80[($475,000$447,000)/(40,00030,000)]
b.$363,000[$447,000(30,000x$2.80),or$475,000(40,000x$2.80)]

15

You might also like