Theory questions answers only. Give solution to problem questions. Please answer. Thank you!

1. A fixed cost within the relevant range

a. increases in total as output increases

b. does not change in total as output changes

c. decreases in total as output decreases

d. has both a variable and a fixed component

2. Variable costs within the relevant range

a. stay constant on a per unit basis as output

changes

b. increase in total as output increases

c. decrease in total as output decreases

d. all of these are correct

3. When a mixed cost is graphed the slope of the

line equals

a. the fixed cost per unit of output

b. the total cost per unit

c. the sales price per unit

d. the variable cost per unit of the activity driver

4. If sales revenue doubles, fixed costs will

a. decrease in total.

b. increase in total.

c. decrease on a per unit basis.

d. increase on a per unit basis.

5. Of the following methods, the one that would not

be appropriate for analyzing how a specific cost

behaves is

a. the scattergraph method.

b. the industrial engineering approach.

c. linear programming.

d. statistical regression analysis.

6. Advantages of the method of least squares over

the high-low method include all of the following

except

a. a statistical method is used to mathematically

derive the cost function

b. only two points are used to develop the cost

function

c. the squared differences between actual

observations and the line (cost function) are

minimized

d. all the observations have an effect on the cost

function

7. 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.

8. In regression analysis, which of the following

correlation coefficients represents the strongest

relationship between the independent and

dependent variables?

a. 1.03 c. -.89

b. -.02 d. .75

9. The relationship between cost and activity is

termed:

a. cost estimation. c. cost behavior.

b. cost prediction. d. cost analysis.

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.

11. A high R2 measure in regression analysis is

preferred because:

a. it indicates a good fit of the regression line

through the data points.

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.

12. Since Anytime Pan is open 24 hours a day, its

oven is constantly on and is, therefore, always

using natural gas. However, when there is no pan

in the oven, the oven automatically lowers its

flame and reduces its natural gas usage by 70%.

The cost of natural gas would best be described as

a:

a. fixed cost d. step-variable cost

b. mixed cost e. true variable cost

c. step-fixed cost

13. Which cost is LEAST likely to be direct to a

particular product?

a. Salaries of salespeople who sell all of the

company's products.

b. Advertising of the product.

c. License fees paid to the designer of the

product.

d. Cost of materials used to make the product.

14. The range of activity within which a linear cost

function is valid is called the

a. normal range.

b. relevant range.

c. activity range.

d. none of these.

15. If a cost can be reduced to zero in the short run

without significantly harming the organization, the

cost is a

a. variable cost. c. discretionary cost.

b. committed cost. d. product cost.

16. Which of the following is a variable cost?

a. A cost that is P26,000 when production is

65,000, and P26,000 when production is

91,000.

b. A cost that is P26,000 when production is

65,000, and P36,400 when production is

91,000.

c. A cost that is P26,000 when production is

65,000, and P52,000 when production is

91,000.

d. A cost that is P52,000 when production is

65,000, and P52,000 when production is

91,000.

17. 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. P2 P600

c. P2 P500

d. P4 P600

18. Fixed cost per unit is P9 when 20,000 units are

produced and P6 when 30,000 units are produced.

What is the total fixed cost when nothing is

produced?

a. P120,000

b. P270,000

c. P15

d. P180,000

e. P0

19. 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 sixunit

case of Tory's single product is four machinehours.

Tory applies manufacturing overhead to

production on the basis of machine-hours, and its

normal annual production is 50,000 cases.

20. 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.

21. Tory's predetermined fixed manufacturing

overhead rate would be

a. P4.80/MH. c. P3.20/MH.

b. P4.00/MH. d. P1.60/MH.

22. Litton Productions, Inc. owns and operates a chain

of movie theaters. The theaters in the chain vary

from 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 company'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. P 90,000 c. P180,000

b. P105,000 d. P270,000

24. Anderson Corporation has provided the following

production and average cost data (per unit) for

two levels of monthly production volume. The

company produces a single product.

Production volume 4,000 units 5,000 units

Direct materials P99.20 P99.20

Direct labor P45.50 P45.50

Manufacturing overhead P94.00 P77.60

The best estimate of the total monthly fixed

manufacturing cost is:

a. P388,000 c. P376,000

b. P954,800 d. P328,000

25. 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.

26. 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.

27. A mixed cost function has a constant component of

P20,000. If the total cost is P60,000 and the

independent variable has the value 200, what is

the value of the slope coefficient?

a. P200 c. P400

b. P600 d. P40,000

28. 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. P 4,000,000

b. P6,250,000 d. P12,500,000

Use the following information for the next two questions.

Data concerning Nelson Company's activity for the

first six months of the year appear below:

Machine Electrical

Month Hours Cost

January 4,000 P3,120

February 6,000 P4,460

March 4,800 P3,500

April 3,800 P3,040

May 3,600 P2,900

June 4,200 P3,200

29. Using the high-low method of analysis, the

estimated variable electrical cost per machine hour

is:

a. P0.65. c. P0.70.

b. P0.40. d. P0.67.

30. Using the high-low method of analysis, the

estimated monthly fixed component of the

electrical cost is:

a. P1,520. c. P 260.

b. P 440. d. P 560.