MAS 3102 Costs Behavior Determination and Prediction - MCQ PDF

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MANAGEMENT ADVISORY SERVICES MAS 3102 MCQ – Costs Behavior, Determination and Prediction 1. Of a. b. c. d.

TRINIDAD/ALENTON OCTOBER 2021

the following methods, the one that would not be appropriate for analyzing how a specific cost behaves is the scattergraph method. the industrial engineering approach. linear programming. statistical regression analysis.

2. A management accountant performs a linear regression of maintenance cost vs. production using a computer spreadsheet. The regression output shows an "intercept" value of P322,897. How should the accountant interpret this information? a. Y has a value of P322,897 when X equals zero. b. X has a value of P322,897 when Y equals zero. c. The residual error of the regression is P322,897. d. Maintenance cost has an average value of P322,897. 3. Which of the following statements most accurately explains the behavior of costs? a. There is no norm; rather, costs can be fixed, variable, or a combination of both. b. The majority of costs are variable per unit of production. c. The majority of costs are fixed per unit of production. d. Costs can be fixed or variable but usually not a combination of both. 4. Which of the following statements is true regarding fixed and variable costs? a. Both costs are constant when considered on a total basis. b. Variable costs are constant in total, and fixed costs are constant per unit. c. Both costs are constant when considered on a per unit basis. d. Fixed costs are constant in total, and variable costs are constant per unit. 5. An a. b. c. d.

outlier is something that happens outside the organization that does not affect production. always used in analyzing a mixed cost. something that happens inside the organization that does not affe ct production. typically not used in analyzing a mixed cost.

6. When graphed, a typical variable cost appears as: a. a horizontal line. b. a vertical line. c. a diagonal line that slopes downward to the right. d. a diagonal line that slopes upward to the right. 7. A cost that has both a fixed and variable component is best termed a: a. step-fixed cost. c. step-variable cost. b. semivariable cost. d. curvilinear cost. 8. The relevant range is that range of activity: a. where a company achieves its maximum efficiency. b. where units produced equal units sold. c. where management expects the firm to operate. d. where the firm will earn a profit. 9. A high R2 measure in regression analysis is preferred because: a. it indicates a good fit of the regression line through the data point s. b. it shows that a great deal of the change in the dependent variable is explained by change in the independent variable. c. it means that the independent variable is a good predictor of the dependent variable. d. it means that the cost analyst can be relatively confident in his or her cost predictions. e. all of the preceding statements are true. 10. Assume total costs are represented on the vertical ( y) axis and volume of activity is represented on the horizontal (x) axis. If the graph shows a line that is parallel to the horizontal axis, then the graph best illustrates a. fixed costs per unit. b. equipment maintenance cost. c. total direct materials cost. d. factory supervisory salaries. 11. A multiple regression equation has: a. more than one dependent variable. b. more than one independent variable.

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MAS.3102 MCQ

EXCEL PROFESSIONAL SERVICES, INC. c. more than one amount for total fixed cost. d. both A and B above. 12. A fixed cost that would be considered a direct cost is. a. A cost accountant’s salary when the cost objective is a unit of product. b. The rental cost of a warehouse to store inventory when the cost objective is the Purchasing Department. c. A production supervisor’s salary when the cost o bjective is the Production Department. d. Board of directors’ fees when the cost objective is the Marketing Department. 13. Put the following steps in order for using the high-low method of estimating a cost function: A = Identify the cost function B = Calculate the constant C = Calculate the slope coefficient D = Identify the highest and lowest observed values A. D C A B C. A D C B B. C D A B D. D C B A 14. The following information was taken from a computer printout generated with the least squares method for use in estimating overhead costs: Slope 90 Intercept 11400 Correlation coefficient 0.6 Activity variable Direct labor hours The cost formula is A. OVERHEAD = P11,400 - P90X C. OVERHEAD = P11,400 + (P45 X 0.6) B. OVERHEAD = P11,400 + P90X D. OVERHEAD = P11,400 X 0.6 15. Which of the following is a variable cost? a. A cost that is P26,000 when production b. A cost that is P26,000 when production c. A cost that is P26,000 when production d. A cost that is P52,000 when production 16. Which of the following is a mixed a. A cost that is P32.00 per unit b. A cost that is P32.00 per unit c. A cost that is P32.00 per unit d. A cost that is P64.00 per unit

cost? when when when when

is is is is

65,000, 65,000, 65,000, 65,000,

production production production production

is is is is

and and and and

P26,000 P36,400 P52,000 P52,000

80,000, 80,000, 80,000, 80,000,

and and and and

when when when when

P32.00 P40.00 P26.00 P64.00

production production production production

is is is is

91,000. 91,000. 91,000. 91,000.

per unit when production per unit when production per unit when production per unit when production

is is is is

128,000. 128,000. 128,000. 128,000.

17. Holly, which uses the high-low method, had an average cost per unit of P10 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of P6.50 at its highest level of activity when sales equaled 20,000 units. Holly would estimate fixed costs as a. P70,000. c. P8.25. b. P16.50. d. P100,000. 18. Citrus, Inc. used the high-low method to estimate that its fixed costs are P210,000. At its low level of activity, 100,000 units, average cost was P2.60 per unit. What would Citrus predict its average cost per unit to be when production is 200,000 units? a. P1.05 c. P2.60 b. P1.55 d. P5.20 Use the following information for the next two questions. Tory Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost. y = P80,000 + P12X where: y = monthly manufacturing overhead cost X = machine-hours The standard error of estimate of the regression is P6,000. The standard time required to manufacture one six-unit case of Tory’s single product is four machine -hours. Tory applies manufacturing overhead to production on the basis of machine-hours, and its normal annual production is 50,000 cases. 19. Tory’s estimated variable manufacturing overhead cost for a month in which scheduled production is 10,000 cases would be a. P80,000. c. P160,000. b. P480,000. d. P320,000. 20. Tory’s predetermined fixed manufacturing overhead rate would be

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MAS.3102 MCQ

EXCEL PROFESSIONAL SERVICES, INC. a. P4.80/MH. b. P4.00/MH.

c. P3.20/MH. d. P1.60/MH.

21. Cook Co.'s total costs of operating five sales offices last year were P500,0 00, of which P70,000 represented fixed costs. Cook has determined that total costs are significantly influenced by the number of sales offices operated. Last year's costs and number of sales offices can be used as the bases for predicting annual costs. Wha t would be the budgeted costs for the coming year if Cook were to operate seven sales offices? a. P700,000 c. P614,000 b. P672,000 d. P586,000 22. Litton Productions, Inc. owns and operates a chain of movie theaters. The theaters in the chain vary fro m low volume, small town to high volume, Big City/downtown theaters. Management is considering installing machines that will make popcorn on the premises. This proposed feature would be properly advertised and is intended to increase patronage at the com pany’s theaters. These machine are available in two different sizes with the following details: Economy Regular Annual capacity (in boxes) 50,000 120,000 Costs Annual machine rental P 80,000 P110,000 Popcorn cost per box 1.30 1.30 Cost of each box 0.80 0.80 Other variable costs/box 2.20 1.40 The level of output in boxes at which the Economy Popper and the Regular Popper would earn the same profit (loss) is a. 50,000 c. 37,500 b. 65,000 d. 40,000 23. Alma Corporation has developed the following flexible budget formula for annual indirect labor costs: Total Cost = P180,000 + P4.50 per machine hr. Operating budgets for the current month are based upon 20,000 machine hours of planned machine time. Indirect labor costs included in this monthly planning budget are: a. P90,000 c. P180,000 b. P105,000 d. P270,000 24. Northridge, Inc., uses the high-low method to analyze cost behavior. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged P10.50 per hour. When activity jumped to 24,000 machine hours, which was still within the relevant range, the average total cost per machine hour was P9.75. On the basis of this information, the company's fixed maintenance costs were: a. P24,000 c. P210,000 b. P90,000 d. P234,000 25. A company wants to open a new store in one of two nearby shopping malls. In Mall A, the rent will be P250,000 per year. In Mall B, the rent will be 4% of gross revenues. Assuming that revenues and all other elements under consideration are the same for both malls, at what level of revenues will the company be indifferent between the two malls? a. P1,000,000 c. P4,000,000 b. P6,250,000 d. P12,500,000 26. A review of Parry Corporation's accounting records found that at a volume of 90,000 units, the variable and fixed cost per unit amounted to P8 and P4, respectively. On the basis of this information, what amount of total cost would Parry anticipate at a volume of 85,000 units? a. P1,020,000. c. P1,060,000. b. P1,040,000. d. P1,080,000. 27. The following summations are available: Sum of hours 860 Sum of costs 4,120 Sum of hours x cost 890,000 Sum of hours squared 187,000 Number of months analyzed 4 Using the “least-squares method” for splitting a semi-variable cost, what is the variable rate per hour? Variable rate per hour Fixed cost a. P3 P500 b. 2 600 c. 2 500 d. 4 600 28. A company has the following budget formula for annual electricity expense in its shop: Expense = P7,200 + (Units produced × P0.60) If management expects to produce 15,000 units during February, the appropriate monthly flexible budget allowance for the purpose of performance evaluation should be a. P7,200 c. P9,600 b. P9,000 d. P16,200...