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# Ch10 - CHAPTER 10 DETERMINING HOW COSTS BEHAVE TRUE/FALSE 1...

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CHAPTER 10 DETERMINING HOW COSTS BEHAVE TRUE/FALSE 1. One assumption frequently made in cost behavior estimation is that changes in total costs can be explained by changes in the level of a single activity. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : cost estimation 2. All cost functions are linear. Answer : False Difficulty : 1 Objective : 1 Terms to Learn : cost function All cost functions are not linear, but for cost-behavior estimation we assume some are linear within a relevant range. 3. When estimating a cost function, cost behavior can be approximated by a linear cost function within the relevant range. Answer : True Difficulty : 2 Objective : 1 Terms to Learn : cost estimation, cost function 4. y = a + bX represents the general form of the linear cost function. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : cost function, linear cost function 5. A linear cost function can only represent fixed cost behavior. Answer : False Difficulty : 1 Objective : 2 Terms to Learn : cost function, linear cost function A linear cost function can represent fixed, mixed, or variable cost behavior. 6. In a graphical display of a cost function, the steepness of the slope represents the total amount of fixed costs. Answer : False Difficulty : 1 Objective : 2 Terms to Learn : cost function, linear cost function In a graphical display of a cost function, the constant or the y-intercept represents the amount of fixed costs. 10-1

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7. The longer the time horizon, the more likely that a cost will have a fixed cost behavior. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : cost function, linear cost function The longer the time horizon, the more likely a cost will be variable . 8. Outside of the relevant range, variable and fixed cost-behavior patterns may change. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : cost function, linear cost function 9. Any linear cost function can be graphed by knowing only the slope coefficient. Answer : False Difficulty : 1 Objective : 2 Terms to Learn : cost function, linear cost function A linear function can be graphed if the slope coefficient and the intercept are known. 10. Knowing the proper relevant range is essential to properly classify costs. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : cost function 11. It can be inferred that when there is a high correlation between two variables, one is the cause of the other. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : cost function It cannot be inferred that a high correlation between two variables indicates that one is the cause of the other. A high correlation simply indicates that the variables move together. 12.
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Ch10 - CHAPTER 10 DETERMINING HOW COSTS BEHAVE TRUE/FALSE 1...

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