Module_15_Multiple_Choice_Ans

# Module_15_Multiple_Choice_Ans - Module 15 Multiple Choice...

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Module 15 Multiple Choice MC15-1 Fixed Costs LO1 Solution a. Typically, depreciation cost on assets (buildings and equipment) in a staff department such as Human Resources remains constant irrespective of the volume of output. MC15-2 Step Costs LO1 Solution a. Step costs behave as fixed costs within a relatively narrow range, but increase to a higher level when that range is exceeded. Typical example of step costs is an inspection cost where each inspector can handle a fixed volume of product. MC15-3 Fixed Costs LO1 Solution c. Over the short term, fixed costs are indifferent to activity level changes. For example the cost of property taxes on a building would not change based on activity volume differences. MC15-4 Relevant Range LO1 Solution d. When developing a cost model for a firm or segment of a firm, that model is only relevant within the range of capacity of the fixed costs. For example if the current level of fixed cost of \$10 million represents a capacity of 2 million units of output, that cost model cannot be used to estimate the cost of producing more than 2 million units. MC15-5 Discretionary Fixed Costs LO1 Solution c. Management decides during each budget period how much it will spend on discretionary items such as charitable contributions and training. These costs are not related to the capacity of operations. MC15-6 Discretionary Fixed Costs LO1 Solution b. Donations are not related to the capacity of operations, but are determined by the discretion of management. MC15-7 Cost Estimation LO2 Solution b. A mathematical equation that models the relationship between cost (the dependent variable) and activity level (the independent variable) is used in estimating costs for different levels of activity. ©Cambridge Business Publishers, 2008 st Edition

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MC15-8 Scatter Diagram Method LO2 Solution d. The scatter diagram method depends of visual observation of the data points on a graph
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Module_15_Multiple_Choice_Ans - Module 15 Multiple Choice...

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