Total Variable Costs

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MODULE 2

1. To predict costs and manage them on a day-to-day basis, managers must identify: A. cost of resources used B. key activities and resources used to perform activities C. cost drivers D. all of the above

2. Cost drivers are ________. A. measures of activities that require the use of resources and thereby cause costs B. different types of functional areas in the firm C. different types of cost calculations D. the different functions in the value chain

3. Which of the following statements about costs is FALSE? A. Managers can control costs without understanding how activities of an organization affects its costs. B. It is important to identify the appropriate cost drivers. C. An organization may have cost drivers across various activities of its value chain. D. One of the main goals of management accounting is helping managers control costs.

4. To control costs, managers should focus their efforts on managing ________. A. activities required to make, sell and deliver products or services B. revenues from products or services C. products or services D. production costs of products or services

5. Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane. What is an appropriate cost driver for the labor resources used for this activity? A. number of service center hours B. number of labor hours used for installation C. number of engineering hours D. number of mechanic hours

6. Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane. What is an appropriate cost driver for the cost of the seats? A. number of mechanic hours B. number of labor hours used for installation C. number of seats installed D. number of engineering hours

7. Consider the following activity: The installation of seats by an airplane manufacturer in a commercial airplane. What is an appropriate cost driver for the salary of the supervisor in charge of this activity? A. weight of the seats installed B. number of workers supervised C. number of mechanic hours

D. number of engineering hours

8. Which of the following cost drivers would NOT be appropriate for the customer services activity of the value chain? A. number of engineering hours by research and development staff B. number of service call workers C. hours spent servicing products D. number of service calls

9. Consider the following activity: Several product and process engineers are working to make improvements to several existing products. These improvements revolve around safety and durability issues. What is an appropriate cost driver for this activity? A. number of engineering hours B. number of parts per product C. number of products D. all of the above

10. Several machines are used in the factory to manufacture a simple product. What is an appropriate cost driver for the depreciation expense on the machines? A. number of service calls B. number of advertisements C. number of machine hours D. number of hours spent servicing defective products

11. Which value chain function would use the following cost driver: number of advertisements? A. marketing B. customer service C. distribution D. production

12. When analyzing costs, accountants should think of variable costs on a ________ basis and fixed costs on a ________ basis. A. per-unit; total B. per-unit; per-unit C. total; total D. total; per-unit

13. As sales volume decreases in the relevant range, fixed costs per unit ________, but total fixed costs ________. A. do not change; increase B. decrease: do not change C. do not change; decrease D. increase; do not change

14. As sales volume increases in the relevant range, a fixed cost does not change ________, but the fixed cost ________ becomes progressively smaller.

A. B. C. D.

per-unit; total in total; per year per-unit; per-unit in total; per-unit

15. As the sales volume increases in the relevant range, variable costs per unit...
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