# Activity based questions

Question # 00003932 Posted By: smartwriter Updated on: 11/23/2013 02:56 AM Due on: 12/01/2013
Subject Economics Topic General Economics Tutorials:
Question

ACTIVITY ANALYSIS,COST – BEHAVIOUR AND COST ESTIMATION

Multiple Choice Questions

1. The relationship between cost and activity is termed:

A. cost estimation.

B. cost prediction.

C. cost behavior.

D. cost analysis.

E. cost approximation

2. Which of the following costs changes in direct proportion to a change in the activity level?

A. Variable cost.

B. Fixed cost.

C. Semivariable cost.

D. Step-variable cost.

E. Step-fixed cost.

3. Montgomery Company has a variable selling cost. If sales volume increases, how will the total variable cost and the variable cost per unit behave?

 Total Variable Cost Variable Cost Per Unit A. Increase Increase B. Increase Remain constant C. Increase Decrease D. Remain constant Decrease E. Decrease Increase

4. What type of cost exhibits the behavior that follows?

 Manufacturing Volume (Units) Cost Per Unit 50,000 \$1.95 70,000 1.95

A. Variable cost.

B. Fixed cost.

C. Semivariable cost.

D. Discretionary fixed cost.

E. Step-fixed cost

5. Plaza Corporation observed that when 25,000 units were sold, a particular cost amounted to \$70,000, or \$2.80 per unit. When volume increased by 15%, the cost totaled \$80,500 (i.e., \$2.80 per unit). The cost that Plaza is studying can best be described as a:

A. variable cost.

B. fixed cost.

C. semivariable cost.

D. discretionary fixed cost.

E. step-fixed cost.

6. A company observed a decrease in the cost per unit. All other things being equal, which of the following is probably true?

A. The company is studying a variable cost, and total volume has increased.

B. The company is studying a variable cost, and total volume has decreased.

C. The company is studying a fixed cost, and total volume has increased.

D. The company is studying a fixed cost, and total volume has decreased.

E. The company is studying a fixed cost, and total volume has remained constant.

7. Webster has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead, \$150,000; fixed overhead, \$240,000. If Webster now revises its anticipated production slightly downward, it would expect:

A. total fixed overhead of \$240,000 and a lower hourly rate for variable overhead.

B. total fixed overhead of \$240,000 and the same hourly rate for variable overhead.

C. total fixed overhead of \$240,000 and a higher hourly rate for variable overhead.

D. total variable overhead of less than \$150,000 and a lower hourly rate for variable overhead.

E. total variable overhead of less than \$150,000 and a higher hourly rate for variable overhead.

8. What type of cost exhibits the behavior that follows?

 Manufacturing Volume (Units) Total Cost Cost Per Unit 50,000 \$150,000 \$3.00 80,000 150,000 1.88

A. Variable cost.

B. Fixed cost.

C. Semivariable cost.

D. Step-variable cost.

E. Mixed cost.

9. When graphed, a typical variable cost appears as:

A. a horizontal line.

B. a vertical line.

C. a u-shaped line.

D. a diagonal line that slopes downward to the right.

E. a diagonal line that slopes upward to the right.

10. Norman Company pays a sales commission of 5% on each unit sold. If a graph is prepared, with the vertical axis representing per-unit cost and the horizontal axis representing units sold, how would a line that depicts sales commissions be drawn?

A. As a straight diagonal line, sloping upward to the right.

B. As a straight diagonal line, sloping downward to the right.

C. As a horizontal line.

D. As a vertical line.

E. As a curvilinear line.

11. When graphed, a typical fixed cost appears as:

A. a horizontal line.

B. a vertical line.

C. a u-shaped line.

D. a diagonal line that slopes downward to the right.

E. a diagonal line that slopes upward to the right.

12. Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are termed:

A. step-fixed costs.

B. step-variable costs.

C. semivariable costs.

D. curvilinear costs.

E. mixed costs.

13. Straight-line depreciation is a typical example of a:

A. variable cost.

B. step-variable cost.

C. fixed cost.

D. mixed cost.

E. curvilinear cost.

14. Which of the following choices denotes the typical cost behavior of advertising and sales commissions?

 Advertising Sales Commissions A. Variable Variable B. Variable Fixed C. Fixed Variable D. Fixed Fixed E. Semivariable Variable

15. Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity amounted to \$50,000; variable costs were \$100,000. How much cost would the company anticipate if during the next period it produced and sold 102,000 units?

A. \$150,000.

B. \$151,000.

C. \$152,000.

D. \$153,000.

E. Some other amount not listed above.

16. Extron, Inc., has only variable costs and fixed costs. A review of the company's records disclosed that when 100,000 units were produced, fixed manufacturing costs amounted to \$200,000 and the cost per unit manufactured totaled \$5. On the basis of this information, how much cost would the firm anticipate at an activity level of 97,000 units?

A. \$485,000.

B. \$491,000.

C. \$494,000.

D. \$500,000.

E. Some other amount not listed above.

17. 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 \$8 and \$4, respectively. On the basis of this information, what amount of total cost would Parry anticipate at a volume of 85,000 units?

A. \$1,020,000.

B. \$1,040,000.

C. \$1,060,000.

D. \$1,080,000.

E. Some other amount not listed above.

18. Each of Davidson's production managers (annual salary cost, \$45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth. Davidson's salary cost can best be described as a:

A. variable cost.

B. semivariable cost.

C. step-variable cost.

D. fixed cost.

E. step-fixed cost.

19. A cost that has both a fixed and variable component is termed a:

A. step-fixed cost.

B. step-variable cost.

C. semivariable cost.

D. curvilinear cost.

E. discretionary cost.

20. A mixed cost is often known as a:

A. semivariable cost.

B. step-fixed cost.

C. variable cost.

D. curvilinear cost.

E. discretionary cost.

21. Richard Hamilton has a fast-food franchise and must pay a franchise fee of \$35,000 plus 3% of gross sales. In terms of cost behavior, the fee is a:

A. variable cost.

B. fixed cost.

C. step-fixed cost.

D. semivariable cost.

E. curvilinear cost.

22. Which of the following are examples of a mixed cost?

I. A building that is used for both manufacturing and sales activities.

II. An employee's compensation, which consists of a flat salary plus a commission.

III. Depreciation that relates to five different machines.

IV. Maintenance cost that must be split between sales and administrative offices.

A. I only.

B. II only.

C. I and III.

D. I, III, and IV.

E. I, II, III, and IV.

23. Which of the following costs exhibits both decreasing and increasing marginal costs over a specific range of activity?

A. Semivariable cost.

B. Curvilinear cost.

C. Step-fixed cost.

D. Step-variable cost.

E. Fixed cost.

24. 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.

E. where expected results are abnormally high.

25. Within the relevant range of activity, costs:

A. can be estimated with reasonable accuracy.

B. can be expected to change radically.

C. exhibit decreasing marginal cost patterns.

D. exhibit increasing marginal cost patterns.

E. cannot be estimated satisfactorily.

26. Within the relevant range, a curvilinear cost function can sometimes be graphed as a:

A. straight line.

B. jagged line.

C. vertical line.

D. curved line.

E. horizontal line.

27. As a firm begins to operate outside the relevant range, the accuracy of cost estimates for fixed and variable costs:

 Fixed Variable A. increases increases B. increases decreases C. decreases increases D. decreases decreases E. decreases remains unchanged

28. A variable cost that has a definitive physical relationship to the activity measure is called a(n):

A. discretionary cost.

B. engineered cost.

C. managed cost.

D. programmed cost.

E. committed cost.

29. Costs that result from an organization's ownership or use of facilities and its basic organizational structure are termed:

A. discretionary fixed costs.

B. committed fixed costs.

C. discretionary variable costs.

D. committed variable costs.

E. engineered costs.

30. Property taxes are an example of a(n):

A. committed fixed cost.

B. committed variable cost.

C. discretionary fixed cost.

D. discretionary variable cost.

E. engineered cost.

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1. ## Solution: Activity based questions

Tutorial # 00003712 Posted By: smartwriter Posted on: 11/23/2013 03:00 AM
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fixed cost. 14. choices denotes the typical cost behavior of advertising ...
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