QUIZ SAMPLE - CHAPTER 6
1.
Costs that do not increase as the volume of production increases are:
A.
variable costs.
C.
mixed costs.
B.
fixed costs.
D.
step costs.
2.
When graphing total fixed costs, using a horizontal axis representing units of production and the
vertical axis representing total costs, the line on the graph would be shown as a(n):
A.
horizontal line.
B.
vertical line.
C.
upward sloping line.
D.
downward sloping line.
3.
Which of the following statements is NOT true about costs per unit within the relevant range?
A.
Variable costs stay constant with changes in volume.
B.
Curvilinear costs stay constant with changes in volume.
C.
Fixed costs decrease in proportion to increases in volume.
D.
Mixed costs decrease, but not in direct proportion to increases in volume.
4.
How would the equation for total costs be written using the following?
y = total costs
v = variable cost per unit of activity
x = volume of activity
f = total fixed costs
A.
B.
y=f
y = xv
C.
D.
y = f + xv
y = xf
5.
A cell phone bill consisting of a monthly base, plus an added amount when too many minutes are
used can be classified as a:
A.
variable cost.
B.
fixed cost.
C.
mixed cost.
D.
step cost.
6.
A company is analyzing its mixed costs. During March, its busiest month, a company had total
labor hours of 13,000 and total costs of $33,000. During August, its slowest month, the company
had labor hours of 7,000 and total costs of $21,000. The company is planning for 17,000 direct
labor hours next March. How many dollars should the company budget for fixed costs during
March?
A.
$6,000
C.
$34,000
B.
$7,000
D.
$41,000
7.
A company is analyzing its mixed costs. During March, its busiest month, a company had total
labor hours of 13,000 and total costs of $33,000. During August, its slowest month, the company
had labor hours of 7,000 and costs total of $21,000. The company is planning for 11,000 direct
labor hours next March. How many dollars should the company budget for total costs during
March?
A.
$6,000
C.
$12,000
B.
$7,000
D.
$29,000
8.
Which of the following statements is NOT true regarding regression analysis?
A.
Regression analysis is a statistical procedure for determining the line that best fits the
data.
B.
Regression analysis uses the high volume and low volume points to determine the best fit
between the two data points.
C.
Regression analysis helps generate a statistic, called the R-square, which tells how well
the line fits the data points.
D.
Regression analysis helps managers implement activity based costing systems.
9.
Which of the following is a data concern when using the high-low method and regression
analysis?
A.
Outliers
B.
The use of only two data points
C.
Low variable cost per unit
D.
High fixed costs
10.
An income statement organized according to the contribution margin approach:
A.
subtracts variable costs from sales revenue to show the contribution margin.
B.
presents all variable costs whether relating to the merchandise sold or selling and
administrative activities, above the contribution margin line.
C.
is all of the above.
D.
subtracts COGS from sales revenue to show the gross margin.
Answers
1. B
2. A
3. B
4. C
5. C
6. B
Variable costs per unit = change in costs per unit = ($33,000-$21,000) / 13,000 hrs 7,000 hrs)
= 12,000 / 6,000
= $2.00 per hr
Total cost = fixed cost + (variable costs per unit x volume)
At 13,000 hrs: $33,000 = fixed costs + (2.00 per hr x 13,000 hrs)
$33,000 = fixed costs + 26,000
Fixed costs = 33,000 26,000 = $7,000
7. D
Using the numbers from problem 6 above:
Total costs = fixed cost + (variable costs per unit x volume)
Total costs = $7,000 + (2.00 per hr x 11,000 hrs) = $29,000
8. B
9. A
10. C