Chapter 5 Cost Behavior Analysis and Use

Chapter 5 Cost Behavior Analysis and Use - Chapter 5 Cost...

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Chapter 5 Cost Behavior: Analysis and Use Garrison, Managerial Accounting, 12th Edition 213 True/False Questions 1. A variable cost is a cost that remains constant in total throughout wide ranges of activity. Answer: False Level: Easy LO: 1 2. If the activity level increases, then one would expect the variable cost per unit to increase as well. Answer: False Level: Medium LO: 1 3. Fixed costs expressed on a per unit basis vary inversely with changes in activity. Answer: True Level: Medium LO: 1 4. Calculation of fixed costs on a per unit basis is critical for internal reporting to managers. Answer: False Level: Medium LO: 1 5. Management's strategy will determine to a large degree the classification of a fixed cost as discretionary or committed. Answer: True Level: Easy LO: 1 6. Committed fixed costs cannot be reduced to zero without seriously impairing the company's long term goals. Answer: True Level: Easy LO: 1 7. Unless the behavior pattern of each cost of a company is understood, the impact of a company's activities on its costs will not be known until after the activity has occurred. Answer: True Level: Medium LO: 1 8. When using the high-low method, if the high and low activity levels do not coincide with the high and low levels of cost, then the analyst should use the points with the high and low levels of cost. Answer: False Level: Medium LO: 3
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Chapter 5 Cost Behavior: Analysis and Use 214 Garrison, Managerial Accounting, 12th Edition 9. A traditional functional income statement organizes costs on the basis of behavior. Answer: False Level: Easy LO: 4 10. The contribution income statement organizes costs according to behavior. Answer: True Level: Easy LO: 4 11. The contribution margin represents the amount available to contribute toward covering fixed expenses and toward profits for the period. Answer: True Level: Easy LO: 4 12. Most companies use the contribution approach in preparing financial statements for external reporting purposes. Answer: False Level: Medium LO: 4 13. In the least-squares regression method, total cost is considered to be “Y”, the dependent variable. Answer: True Level: Easy LO: 5 14. The least-squares regression method computes the regression line that minimizes the sum of the squared deviations from the plotted points to the line. Answer: True Level: Medium LO: 5 15. Account analysis is a special form of least-squares regression in which more than one account is analysed at the same time. Answer: False Level: Easy LO: 6
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Chapter 5 Cost Behavior: Analysis and Use Garrison, Managerial Accounting, 12th Edition 215 Multiple Choice Questions 16. As the level of activity increases, how will a mixed cost in total and per unit behave? In Total
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This note was uploaded on 01/23/2012 for the course ADMS 2510 taught by Professor Beavis during the Fall '08 term at York University.

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Chapter 5 Cost Behavior Analysis and Use - Chapter 5 Cost...

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