Question Details

Determining How Costs Behave




Objective 

1) A cost function is a ________.
A) process of calculating present value of projected cash flows 
B) process of allocating costs to cost centers or cost objects 
C) mathematical description of how a cost changes with changes in the level of an activity relating to that cost 
D) is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs


2) Bennet Company employs 20 individuals. Eighteen employees are paid $18 per hour and the rest are salaried employees paid $3,000 a month. Which of the following is the total cost function of personnel? 
A) y = a + bX
B) y = b
C) y = bX
D) y = a


3) Crimson Services, Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified?
A) variable cost
B) mixed cost
C) irrelevant cost
D) fixed cost 

4) For February, the cost components of a picture frame include $0.30 for the glass, $0.75 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $500. Two hundred fifty frames are expected to be produced in the coming year. What cost function best represents these costs? 
A) y = 1.85 + 500X 
B) y = 500 + 1.85X 
C) y = 3.85 + 600X 
D) y = 1.05 + 500X 

5) The cost components of a heater include $30 for the compressor, $10 for the sheet molded compound frame, and $75 per unit for assembly. The factory machines and tools cost is $60,000. The company expects to produce 1,000 heaters in the coming year. What cost function best represents these costs? 
A) y = 60,000 + 115X 
B) y = 1,000 + 60,000X 
C) y = 60,000 + 1,000X 
D) y = 1,000 + 115X 






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