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Cost Accounting 101 Practice Test: How Costs Behave
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Cost behavior is how costs respond to changes in cost drivers. It can help determine business decisions and cost drivers.  Here are some ways to determine how costs behave: High-low method: An accounting technique that uses financial data to estimate fixed and variable costs. It can help determine expenses and identify patterns over time. Least squares regression: A method that can overcome weaknesses in the high-low method. It minimizes the sum of residuals, which is the squared distance from a point to a line. Scattergraph: A graph that shows the relationship between total cost and... Show more
Cost Accounting 101 Practice Test: How Costs Behave
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25 Questions

1. An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.
2. The high-low method involves choosing the period of highest cost driver activity and the period of lowest cost driver activity.
3. Which of the following statements related to assumptions about estimating linear cost functions is FALSE?
4. When plotted on a graph, cost functions are usually displayed by having the level of activity (machine hours, etc.) plotted on the horizontal axis (called the x-axis ) and the amount of total costs corresponding to (or dependent on) the levels of that activity on the vertical axis (called the y-axis).
5. Simple regression differs from multiple regression in that:
6. Which of the following does NOT represent a cause-and-effect relationship?
7. A plot of data that results in bunched points with little slope generally indicates:
8. In a graphical display of a cost function, the steepness of the slope represents the total amount of fixed costs.
9. Which cost estimation method is being used by Jerry's TV and Appliance Store?
10. A step fixed-cost function:
11. Data collection problems arise when:
12. Which cost estimation method is being used by Miller's Good Value Appliance Store?
13. An inaccurate cost function with a constant that is estimated too high may most likely result in:
14. A learning curve measures the effect of learning on efficiency.
15. The independent variable:
16. Plotting learning curve observations is helpful in selecting the appropriate learning curve model.
17. McGuinness Company employs 8 individuals. They are all paid $14.50 per hour. How would total costs of personnel be classified?
18. The incremental unit-time learning model with a 90% learning curve indicates that if it takes 100 minutes to manufacture the first unit of a new model, then the second unit will take only 90 minutes to manufacture.
19. A cost function with a lower slope coefficient than a year ago could indicate that:
20. All of the following are cost analysis problems EXCEPT:
21. Managers who design data collection reports that regularly and routinely obtain required data are helping to ensure that:
22. The cost function y = 150 + 10X:
23. Misinterpretation of data can arise when fixed costs are reported on a per unit basis.
24. What were total fixed costs for 2008?
25. The smaller the residual term the:

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