and resource usage. Explain the difference between resource spending 4. Wh at is

Question

and resource usage. Explain the difference between resource spending 4. Wh at is the relationship between flexible resources and cost behavior? at is the relationship between committed resources and cost behavior? 5. Wh 6. Describe the difference between a variable cost and a step-variable cost. When is it ble to treat step-variable costs as if they were variable costs? 7. Wh y do mixed costs pose a problem when it comes to classifying costs into fixed able categories? y is a scattergraph a good first step in separating mixed costs into their fixed and ve components? at are the advantages of the scatterplot method over the high-low method? The hi high-lo 9. What are the advantag method over the scatterplot method? method or the scatterplot method? Explain. o. Describe the method of least squares. Why is this method better than either the 11. What is meant by the best-fitting line? Is the best-fitting line necessarily a good-fitting lin 12. When is multiple regression required to explain cost behavior? 13. Explain the meaning of the learning curve. How do managers determine the appropri 14. Assume you are the manager responsible for implementing a new service. The time to p high-lo learning curve percentage to use? form the service is subject to the learning curve. Would you prefer that the new service ha a learning rate of 85 percent or 80 percent? Why? 15. Some firms assign mixed costs to either the fixed or variable cost categories without usi any formal methodology to separate them. Explain how this practice can be defended

Explanation / Answer

Ans 3.)

During the production of inventory, resources like capital, labor etc. are required to enable the completion of the various activities involved in production function, resource spending is the cost of acquiring the capacity to perform an activity, whereas resource usage is the amount of activity that is actually utilized in the production function, This relationship between resource usage and resource spending is used to define the fixed cost and variable cost behavior. It is also possible to use less of the activity than what is acquired or supplied in this case only the cost of the activity that is actually used should be assigned to the product costs, the unused capacity in this case will be the difference between the capacity acquired and the actual activity usage in production.

Ans 4.)

The resources that are acquired from outside sources, which do not involve any long-term commitment for any given amount of resource to be necessarily acquired in each production cycle, are regarded as Flexible Resources. Thus these are the resources for which the cost spent or the resource usage keeps varying in every production cycle and so these are categorized as variable costs due to the fact that they constantly vary in proportion to the activity driver associated to them.

Reference for the above has been obtained from www.nextwayout.wordpress.com

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