29858222-Chapter-05

29858222-Chapter-05 - Chapter 5 Cost Behavior: Analysis and...

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Unformatted text preview: Chapter 5 Cost Behavior: Analysis and Use True/False Questions 1. Within the relevant range, a change in activity results in a change in total variable cost and the per unit fixed cost. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium 2. The reluctance of managers to lay off employees when activity declines in the short- run leads to an increase in the ratio of variable to fixed costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard 3. A variable cost fluctuates in total as activity changes but remains constant on a per unit basis over the relevant range. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 4. A cost that is classified as variable with respect to one measure of activity could be classified as fixed with respect to a different measure of activity. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard 5. Fixed costs remain constant in total, but vary inversely with changes in activity when expressed on a per unit basis. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 6. Committed fixed costs have a short-term planning horizon--usually one year. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 7. The following costs are all examples of committed fixed costs: depreciation on buildings, advertising, insurance, and management development and training. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 5-5 Chapter 5 Cost Behavior: Analysis and Use 8. The time frame in which discretionary fixed costs are controllable is usually much shorter than the time frame for committed fixed costs. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 9. The high-low method is generally more accurate than the least-squares regression method in analyzing cost behavior. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,5 Level: Easy 10. A major problem with the high-low method of cost estimation is that some data are omitted from the analysis. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy 11. The high and low points used in the high-low method tend to be unusual and therefore the cost formula may not accurately represent all of the data....
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29858222-Chapter-05 - Chapter 5 Cost Behavior: Analysis and...

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