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 costbehavior 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 yintercept represents
the amount of fixed costs.
101
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View Full Document7.
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 costbehavior 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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 Spring '11
 Paul
 Cost Accounting, cost analyst

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