1.

) Range in which relationship exists between level of activity or total cost is called

A. functional range
B. relevant range
C. unit range
D. related range

2.) Relationship based on unrelated level of activity and past data of cost is measured
with help of

A. cost estimation
B. price estimation
C. unit estimation
D. production estimation

3.) Model which states decline in extra time needed to produce last unit, every time
for cumulative quantity of doubled units produced is classified as

A. incremental unit average model

B. incremental cost learning model
C. incremental unit time learning model
D. incremental price learning model

4.) A helpful technique, for accurate forecasts about costs to be incurred in future is a
part of

A. unit estimation
B. production estimation
C. cost estimation
D. price estimation

5.) Deviations between estimated regression line and vertical deviations are classified
as

A. fixed terms
B. indexed terms
C. variable terms
D. residual terms
6.) Estimation of cost functions of an ignoring information from all points, but
considering two observation points, can be classified as

A. disadvantage of low high method

B. disadvantage of high low method
C. advantage of high low method
D. advantage of low high method

7.) An implementation of activity based costing would be possible only if accountants

find

A. goodness of each activity

B. handling of each activity
C. cost driver for each activity
D. cost object for each activity

8.) What is the cost-volume-profit equation?

A. Profit=SP(selling price)x+VC(variable cost)x-TFC(total fixed cost)

B. Profit=SP(selling price)x-VC(variable cost)x-TFC(total fixed cost)
C. Profit=SP(selling price)x+VC(variable cost)x+TFC(total fixed cost)

9.) High-low method is used for estimation of

A. linear coefficient
B. cost coefficient
C. slope coefficient
D. price coefficient

10.) Industrial engineering method is used to analyze relationship between

A. marketing and financing

B. price and costs
C. input and output
D. units and batches

11.) Lower level of production leads to

A. higher setup cost
B. lower repair cost
C. higher setup cost
D. higher repair cost

12.) In plotting cost functions, number of machine hours and batches are
represented on

A. unit axis
B. term axis
C. x-axis
D. y-axis

13.) Cost function, in which graph of total cost would not result in straight line
is classified as

A. nonlinear cost function

B. linear cost function
C. linear price function
D. nonlinear price function

14.) An assumption, which states that there must be linear relationship between
independent variable and dependent variable is

A. irrelevant range of linearity

B. relevant range of linearity
C. significant range
D. insignificant range

15.) Component of total cost, which never changes with change in level of
production is classified as
A. fixed cost
B. constant
C. variable
D. both a and b

16.) In linear cost function, fixed cost is considered as

A. constant
B. variable
C. exponent
D. base

17.) Description in mathematical form to represent changes in cost, with level of

activity related to that cost is classified as

A. cost function
B. revenue function
C. unit function
D. relative function

18.) If difference between costs linked to highest and lowest observation of cost
driver, is $8000 and observation of cost driver is 40 machine hours, then slope
coefficient will be

A. $16,000
B. $200
C. $400
D. $20,000

19.) In adjustment issues and data collection, inflation affects the

A. cost driver and cost
B. cost object and cost
C. heterogeneous cost
D. homogenous cost

20.) Within relevant range, cost function in which cost does not change in
narrow ranges of activity is called

A. fixed cost function

B. variable cost function
C. step variable cost function
D. step fixed cost function

21.) In linear cost function which is y=a + bx, objective is to find the

A. values of a and b
B. values of x and y
C. values of a and x
D. values of b and y

22.) Line which uses to join observations with lower and highest values of cost
driver is called

A. straight line
B. curved line
C. horizontal line
D. vertical line

23.) Better fit between estimated cost and actual observations is represented by
A. variable residual terms
B. smaller residual terms
C. larger residual terms
D. zero residual terms

24.) In estimation of cost functions, variations in a single activity level

represents the

A. related total costs

B. related fixed cost
C. related variable cost
D. related per unit cost

25.) If difference between costs linked to highest and lowest observation of cost
driver is $36000 and observation of cost driver is 30 machine hours, then slope
coefficient would be

A. $1,200
B. $1,400
C. $1,600
D. $1,800

26.) Slope coefficient of linear cost function is

A. zero
B. one
C. two
D. three

27.) If difference between costs linked to highest and lowest observation of cost
driver is $27000 and observation of cost driver is 90 machine hours, then slope
coefficient would be
A. $800
B. $400
C. $300
D. $600

28.) If difference in costs is $9000 and difference in machine hours is $15000,

then slope coefficient would be

A. 1.24
B. 0.24
C. 0.6
D. 1.667

29.) To decide whether cost is variable cost or fixed cost with respect to some
specific activity depends upon

A. units of labor
B. unit of production
C. time horizon
D. units of inventory

30.) In a given scenario, if cost is considered as indirect cost then independent

variable will be considered as

A. demand allocation base

B. supply allocation base
C. cost allocation base
D. price allocation base

31.) If residual error is 51 and predicted cost value is 37, then observed cost
value will be

A. 14
B. 88
C. 24
D. 68

32.) In estimation of cost function, an example of independent variable is

A. level of activity
B. quantity stored
C. quantity manufactured
D. quality of product

33.) Cost that has elements of variable and fixed costs at same time is

A. variable cost
B. mixed cost
C. semi variable cost
D. Both B and C

34.) A cost that changes abruptly at intervals of activity because the resources
and the costs come in indivisible chunks is called a(n):
A. Step cost
B. Activity cost
C. Allocated cost
D. Apportioned cost
35.) The _________ portion of a mixed cost varies proportionately with activity
within the relevant range.
A. Variable
B. Indivisible
C. Fixed
D. Semi-fixed

36.) Managers influence cost behavior through their:

A. Technology decisions
B. Product and service decisions
C. Capacity decisions
D. All of above

37.) In the cost function equation Y=F + VX, Y represents the:

A. Total cost at the X level of activity
B. Fixed cost at the Y level of activity
C. Variable cost per unit of activity X
D. Variable cost at the F level of activity

38.) _______ is the formal method of analysis used by managers to identify

appropriate cost drivers and their effects on the costs of making a product or
providing a service.
A. Activity Analysis
B. Cost analysis
C. Crystal grazing
D. Life costing

39.) The food & beverage section of ABC Ltd incurred the following costs for
March 20XX:
Monthly Cost March 20XX ($)
Supervisor’s salary $ 2,000
Hourly workers’ wages & benefits $10,903
Food $ 11,357
Equipment depreciation & rental $ 9,100
Supplies $ 2,750
Total F & B costs $36,110
The F & B section served 10,505 meals during the month. Using an account
analysis to classify costs, the cost function for ABC Ltd’s Food & beverage
section is:
A. $11,100+$2.381 per meal
B. $4,000 + $3.222 per meal
C. $6,105 +$3.039 per meal
D. $11,100+$2.381 per meal

40.) As volume decreases, total fixed costs

A. are constant and cost per unit decreases
B. are constant and cost per unit increases
C. increase
 D. decrease

41.) Fixed costs that management can decide not to incur at any time are
A. always variable costs
B. unavoidable costs
C. value-added costs
D. discretionary costs

42.) Which of the following is the least likely to be a fixed cost?

A. Utilities
B. Executive management salaries
C. Advertising
D. Copier maintenance

43.) When a cost changes in total in direct proportion to changes in volume it is

a. a semi-variable cost
b. a mixed cost
c. a variable cost
d. a fixed cost

44.) Cost behavior analysis is related to

a. how costs change as new products are introduced
b. how costs change as output changes
c. how costs change over time, trending up or down
d. all of the above

45.) A mixed cost consists of

a. both fixed and variable
b. either fixed or variable
c. product and period
d. direct and indirect

46.) A committed fixed cost

a. must always be paid and can never be eliminated
b. can be eliminated in the short term but not in the long term
 c. can be eliminated in the long term but not in the short term
d. can be easily eliminated

47.) Which of the following states how a variable cost behaves as volume
changes?
a. remains constant in total and remains constant per unit
b. remains constant in total and changes per unit
c. changes in total and remains constant per unit
d. changes in total and changes per unit

48.) Within the relevant range

a. total variable costs decrease as production increases
b. fixed costs per unit decreases as production decreases
c. total fixed costs remain the same when production increases or decreases
d. total variable costs remain the same when production increases or decreases

49.) As volume changes, which of these costs could be considered a mixed cost?
a. sales commission expense
b. assembly line labor
c. salaries of the accountant
d. utilities at the manufacturing plant

50-61.) The following are costs that were incurred by Nike, Inc. Determine which
costs are fixed (F) and which are variable (V).

F 50. office supplies, usually approximately $3,000 per month

V 51. rubber for the sole of the shoe, $6 per shoe
F 52. rent on the manufacturing facility building, $188,000 annually
F 53. sales manager salary, $127,000 annually
V 54. worker who operates the machine that puts the shoe together, $2 per shoe
V 55. shoe laces, $1.80 per shoe
V 56. worker who puts the shoes in the shoe box, $0.20 per shoe
F 57. insurance on the manufacturing facility, $23,000 annually
F 58. water and utilities, $22,000 per month consistently
F 59. depreciation on manufacturing equipment, $18,000 each month
F 60. already contracted advertising on television, $1,800,000 annually
V 61. sales commission paid to salespeople based on 5% of sales
F 62. office supplies, usually approximately $3,000 per month
 F 63. paper for the copier in the executive offices, usually about $1,200 per month
V 64. glue used in the shoe, approximately $0.18 per shoe
F 65. company jet lease, $14,000 per month

66.) XYZ Corporation has reported activity costs. When 10,000 units are produced, the
average cost is $23 per unit. When the activity is only 6,000 units, the average cost is
$30 per unit. What are the fixed and variable costs?
Fixed Variable
a. $105,000.00 $ 12.50
b. 12.50 105,000.00
c. 19.50 (1.75)
d. (8,400.00) 0.08
e. 180,000.00 7.00

67.) Almost Company had setup costs totaling $265,000 when 2,750 setups were
performed. When 3,500 setups were performed, setup costs totaled $310,000.
Determine the fixed and variable cost breakdown for setup costs.
Fixed Variable
a. $ (1,666.67) $ 16.67
b. 475,000.00 (60.00)
c. 100,000.00 60.00
d. 12,000.00 92.00
e. (12,000.00) 92.00
68.) Colfax, Inc., had packaging costs of $150,000 when 12,500 packages were shipped.
Packaging costs were $190,000 when 17,500 packages were shipped. The variable
costs were:
a. $8.00.
b. $10.86.
c. $11.33.
d. $12.00.
e. none of the above.

69.) The amount of activity capacity used in producing the organization’s output is:
a. practical capacity.
b. resource spending.
c. resource usage.
d. unused capacity.
e. none of the above.
70.) Which of the following costs remain constant in total when the level of the activity
driver varies?
a. conversion costs
b. direct costs
c. fixed costs
d. mixed costs
e. variable costs

71.) Committed fixed expenses are costs:

a. incurred that provide long-term activity capacity.
b. that can easily be changed.
c. incurred that provide short-term activity capacity.
d. that are allocated from another organizational unit.

72.) Discretionary fixed expenses are costs:

a. incurred that provide long-term activity capacity.
b. that are supplied as used and needed.
c. that cannot be changed.
d. incurred that provide short-term activity capacity.
e. that are allocated from another organizational unit.
73.) Which of the following is true about resources supplied in advance of usage?
a. There is no unused activity capacity for this category of resources.
b. The organization is free to buy only the quantity of resources needed.
c. These resources may take the form of either committed fixed expenses or
discretionary fixed expenses.
d. Normally a long-term commitment is not required.
e. All of the above are true.

74.) Which of the following is the best definition of a step-fixed cost?

a. It is a cost that is constant in total over the relevant range.
b. It is a cost that varies in total in direct proportion to changes in activity.
c. It is a cost that follows a step-cost behavior with narrow steps.
d. It is a cost that follows a step-cost behavior with wide steps.
e. It is a cost that measures activity usage in steps—first, the fixed cost of resources
used; then, the fixed cost of unused capacity.

75.) The variable whose value is based on the value of another variable is the:
a. activity variable.
b. dependent variable.
c. independent variable.
d. intercept parameter.
 e. slope parameter.

76.) The item that corresponds to the variable cost per unit of activity is the:
a. activity variable.
b. dependent variable.
c. independent variable.
d. intercept parameter.
e. slope parameter.
77.) Variable costs are:
A. Sunk costs.
B. Multiplied by fixed costs.
C .costs that change with the level of production.
D. Defined as the change in total cost resulting from the production of an additional unit
of output.
78.) Which is not a fixed cost?
A) monthly rent of $1,000 contractually specified in a one-year lease
B) an insurance premium of $50 per year, paid last month
C) an attorney's retainer of $50,000 per year
D) a worker's wage of $15 per hour

79.) If you know that with 8 units of output, average fixed cost is $12.50 and average
variable cost is $81.25, then total cost at this output level is:
A) $93.75.
B) $97.78.
C) $750.
D) $880.

80.) With fixed costs of $400, a firm has average total costs of $3 and average variable
costs of $2.50. Its output is:
A) 200 units.
B) 400 units.
C) 800 units.
D) 1,600 units.
81. Firm sells widgets for $14 each. The variable costs for each unit is $8. The
contribution margin per unit is:

a. $ 6
b. $12
c. $14
d. $ 8

82. Company A's fixed costs were $42,000, its variable costs were $24,000, and its sales
were $80,000 for the sale of 8,000 units. The company's break-even point in units is:

a. 8,000
b. 5,000
c. 6,000
d. 7,000

83. Janet sells a product for $6.25. The variable costs are $3.75. Janet's break-even units
are 35,000. What is the amount of fixed costs?

a. $ 87,500
b. $ 35,000
c. $131,250
d. $104,750

84. Company A's fixed costs were $45,000, its variable costs were $24,000, and its sales
were $80,000. The company's break-even point in sales-dollars is:

a. $33,000
b. $64,286
c. $79,000
d. $88,000

85. Currently, a company has fixed costs of $32,500, a contribution ratio of 65%, and is
selling its product for $12 per unit. If the sales price per unit is increased by $4, how
much less will the break-even point in sales be when compared to the current condition?

a. $14,411
b. $13,414
c. $17,500
d. $ 5,932

88. On a cost-volume-profit chart (break-even graph), the total fixed costs are:
a. the point where the sales line intersects the cost line (Y)
b. the point where the sales line crosses the total cost line
c. the point where the total cost line intersects the cost line (Y)
d. the point where the total cost line intersects the volume line (X)

89. When using conventional cost-volume-profit analysis, some assumptions about costs
and sales prices are made. Which one of the following is not one of those assumptions?

a. the costs can be expressed as straight lines in a break-even graph

b. the actual variable cost per unit must vary over the production range
c. the sales price will remain unchanged per unit
d. fixed costs will decrease per unit

90. A firm's fixed costs are $54,000, and it sold 350 units at $140 each. The total variable
costs were $35,000. The net income or loss of the firm was:

a. $40,000 loss
b. $40,000 income
c. $14,000 income
d. $ 9,000 loss

91. The dollar sales necessary to achieve a target income of $21,000 after taxes of 30% is
$450,000. The fixed costs are $240,000. What is the contribution ratio (to the nearest
tenth)?

a. 53.3%
b. 65.0%
c. 58.0%
d. 60.0%

92. If a firm's margin of safety is 35% on sales of $200,000, then its margin of safety on
sales of $300,000 will be (assume fixed costs, the variable cost per unit, and the sales
price per unit do not change):

a. $105,000
b. $170,000
c. $100,000
d. $ 35,000
93. Data from a company's last period of operations shows sales of 2,000 units, total
contribution margin of $50,000, and income after subtracting fixed costs of $30,000 is
$20,000. Should the company experience sales of 2,400 units (within the relevant range,
no sales price increase), net income will be:

a. $40,000
b. $30,000
c. $10,000
d. $20,000

94. If variable cost per unit is $25 and quantity of units sold is 5000, then total variable
cost would be

A. $155,000
B. $125,000
C. $135,000
D. $145,000

95. Variable cost is subtracted from fixed costs to calculate

A. unit income
B. fixed income
C. operating income
D. marginal income

96. If variable cost per unit is $29 and quantity of units sold is 5000, then total variable
cost would be

A. $155,000
B. $125,000
C. $135,000
D. $145,000

97. If variable cost per unit is $27 and quantity of units sold is 5000, then total variable
cost would be

A. $155,000
B. $125,000
C. $135,000
 D. $145,000

98. If variable cost per unit is $25 and quantity of units sold is 6200, then total variable
cost would be

A. $155,000
B. $125,000
C. $135,000
D. $145,000

99. Total revenues is subtracted from total variable costs to calculate

A. revenue margin
B. variable margin
C. contribution margin
D. divisor margin

100. If variable cost per unit is $20 and quantity of units sold is 6500, then total variable
cost would be

A. $130,00
B. $150,000
C. $200,000
D. $155,800