1) For automobile manufacturer, cost of driver's side air bag bought from a supplier and installed in every automobile would best be explained as a:
a. fixed cost.
b. mixed cost.
c. step-variable cost.
d. variable cost.
2) Vicuna Wool Company manufactures and sells sweaters. Last year, Vicuna operated at 100% of capacity and had following cost formula for total manufacturing costs:
Y = $50,000 + $400X
Supposing no change in cost structure, what would Vicuna's cost formula have been last year if they only operated at 90% of production capacity?
a. Y = $45,000 + $360X
b. Y = $45,000 + $400X
c. Y = $50,000 + $360X
d. Y = $50,000 + $400X
3) High-low method uses cost and activity data from just two periods to establish cost formula.
i) True
ii) False
4) Contribution margin equals revenue minus all variable costs.
i) True
ii) False
5) When more than one factor causes variations in variable element of mixed cost, multiple regression analysis must be used.
i) True
ii) False
6) Contribution income statement organizes costs according to behaviour.
i) True
ii) False
7) Term "relevant range" refers to levels of activity within which suppositions relative to cost behaviour are valid.
i) True
ii) False