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12309 Words Jul 7th, 2013 50 Pages
Chapter 05 Cost Behavior: Analysis and Use Answer Key

True / False Questions

1. Economists correctly point out that many costs that the accountant classifies as variable are actually curvilinear.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom 's: Comprehension
Learning Objective: 1
Level: Easy

2. A cost that is obtained in large chunks and that increases or decreases only in response to fairly wide changes in the activity level is known as a step-variable cost.
TRUE

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom 's: Knowledge
Learning Objective: 1
Level: Easy

3. Fixed cost per unit increases as activity
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom 's: Comprehension
Learning Objective: 1
Level: Easy

15. Within the relevant range, the variable cost per unit:
A. remains constant as activity changes.
B. increases as activity increases.
C. decreases as activity increases.
D. can increase or decrease as the activity changes.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom 's: Knowledge
Learning Objective: 1
Level: Easy

16. An increase in the activity level within the relevant range results in:
A. an increase in fixed cost per unit.
B. a proportionate increase in total fixed costs.
C. an unchanged fixed cost per unit.
D. a decrease in fixed cost per unit.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom 's: Knowledge
Learning Objective: 1
Level: Medium

17. The linear equation Y = a + bX is often used to express cost formulas. In this equation:
A. the b term represents variable cost per unit of activity.
B. the a term represents variable cost in total.
C. the X term represents total cost.
D. the Y term represents total fixed cost.

AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom 's: Comprehension
Learning Objective: 1
Level: Medium

18. An example of a discretionary fixed cost is:
A. insurance.
B. taxes on real estate.
C. management training.