Chap011

# Cost Management: Strategies for Business Decisions

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Chapter 11 - Cost Estimation Chapter 11 Cost Estimation True / False Questions 1. Cost estimation is the process of estimating the relationship between costs and the cost drivers that cause those costs. TRUE AACSB: Analytic AICPA FN: Measurement Difficulty: Easy Learning Objective: 1 2. In the formula, "TC = F + VX", X is considered to be the cost driver. TRUE AACSB: Analytic AICPA FN: Measurement Difficulty: Easy Learning Objective: 1 3. A step or semifixed cost increases in a linear pattern as activity levels decrease. FALSE AACSB: Analytic AICPA FN: Measurement Difficulty: Easy Learning Objective: 2 4. Step costs are common wherever people are hired in time increments, such as hourly, daily or monthly. TRUE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Easy Learning Objective: 2 11-1

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Chapter 11 - Cost Estimation 5. The relevant range is the range over which the company expects to operate. TRUE AACSB: Analytic AICPA FN: Measurement Difficulty: Easy Learning Objective: 2 6. All costs can be divided into variable and fixed costs FALSE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 2 7. In multiple regression analysis, we assume only one variable may impact the dependent variable TRUE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 3 8. A cellular telephone plan that charges \$45 per month for up to 1000 minutes per month of airtime and then charges \$0.50 per minute for each minute used over 1000 is an example of a step cost. FALSE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 2 11-2
Chapter 11 - Cost Estimation 9. Learning curve is the mathematical or graphic representation of the systematic relationship between the amount of experience in performing a task and the time required to perform it. TRUE AACSB: Reflective Thinking AICPA BB: Critical Thinking Difficulty: Easy Learning Objective: 7 10. If the learning curve for a production process is 80 percent, the time required to produce each unit is 80 percent of the time to produce the first unit. FALSE AACSB: Reflective Thinking AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 7 11. The learning curve formula "Y = aX raised to b" is a linear relationship. FALSE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 7 12. In regression analysis, X is considered to be an independent variable. TRUE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Medium Learning Objective: 3 11-3

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Chapter 11 - Cost Estimation 13. The high-low method is not considered as technically equal to the regression method. TRUE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Easy Learning Objective: 3 14. In the cost equation, TC = F + VX, the intercept is represented by "V". FALSE
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Chap011 - Chapter 11 Cost Estimation Chapter 11 Cost...

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