Manacct

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 decreases and decreases as activity increases.
TRUE

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

4. A cost formula may not be valid outside the relevant range of activity.
TRUE

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

5. The relevant range concept is not applicable to mixed costs.
FALSE

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

6. The planning horizons for committed fixed costs and discretionary fixed costs are generally the same.
FALSE

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

7. With automation, fixed costs increase relative to variable costs.
TRUE

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

8. The high-low method is generally less accurate than the least-squares regression method for