Put a checkmark next to each statement that is true. Understanding cost behavior

Question

Put a checkmark next to each statement that is true. Understanding cost behavior helps managers predict cost A curvilinear cost can have either a decreasing marginal cost or an increasing marginal cost When examining fixed costs, the relevant range of activity is not an important consideration. Advertising is an example of a committed fixed cost. Property taxes on a factory building is an example of a committed fixed cost. The amount spent on research and development is a discretionary fixed cost. The fixed and variable components of a mixed cost can be estimated using the visual fit method, the high-low method or the least squares regression method. A strength of the visual ft method is its objectivity A strength of the high-low method is that is uses all of the data points. If a manager used the least squares method of semivariable cost estimation O and computed a coefficient of determination of 12%, the independent variable would be a good predictor of cost.

Explanation / Answer

STATEMENT TRUE/FALSE Understanding cost behaviour…………………………… TRUE A curvilinear cost……………………………………………….. TRUE When examining fixed costs, …………………………….. FALSE Advertising is ……………………………………………. FALSE Property taxes……………………………….. TRUE The amount spent on research……………………… TRUE The fixed and variable components………………………… TRUE A strength of the visual fit……………………….. TRUE A strength of the high-low…………………. FALSE

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