ACTG 2020 Chapter Notes - Chapter 3: Squared Deviations From The Mean, Scatter Plot, Cost Driver

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crimsonant364

31 Jan 2017

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Introduction: costs can be variable, fixed or mixed, costs change to the amount of output produced. In order to know how many products to produce --> need to know the capacity (how much we can produce) and demand (how much we should produce) If company produced a few pairs each year --> would not need a supervisor. If company produced 2 - 3 times more --> need to add more shifts --> cost increases. Variable costs: variable costs - costs that, in total, vary in direct proportion to changes in output within the relevant range, total variable cost = variable rate per unit x amount of output. Stays the same: per-unit fixed cost is not that valuable, unit variable cost is a lot more valuable. Are real-world cost relationships linear: most relationships are not linear, example: increased demand for a certain period of time.

Related Questions

Management by exception is the practice of concentrating on areas not operating as anticipated (such as a cost overrun) and placing less attention on areas operating as anticipated.

true false

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

true false

When choosing among cost drivers, managers trade off level of detail, accuracy, feasibility, and costs of estimating functions.

true false

Crimson Services, Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified?

Variable Cost Fixed Cost Mixed Cost Sunk Cost

Why is it important to identify the most appropriate costdrivers for a particular product?

A) so managers can identify the activities necessary tomanufacture a product

B) so managers can control product costs better

C) so managers can predict product costs better and make betterdecisions

D) B and C

Answer:

Cost drivers are ________.

A) the different functions in the value chain

B) different types of functional areas in the firm

C) measures of activities that require the use of resources andthereby cause costs

D) different types of cost calculations

Answer:

Within the relevant range, the total amount of ________ costchanges in direct proportion to changes in the cost driver. Withinthe relevant range, the total amount of ________ cost does notchange in direct proportion to changes in the cost driver.

A) fixed; variable

B) variable; fixed

C) step; mixed

D) mixed; step

Answer:

What happens when the cost-driver level increases within therelevant range?

A) Total fixed costs remain unchanged.

B) Fixed costs per unit of cost driver increase.

C) Total variable costs decrease.

D) Variable costs per unit of cost driver increase.

Answer:

Which of the following costs is a fixed cost?