Chapter 3 quiz

A water utility charges homeowners $0.03 per gallon of water, in addition to a monthly service fee. A customer’s water bill could accurately be classified as a:

• fixed cost

• variable cost

• mixed cost

• standard cost

Geormetician Inc. purchased machinery from Grey Star, which has guaranteed that the machine will last 10 years. Depreciation for the machinery is best classified as a:

• fixed cost

• variable cost

• mixed cost

• standard cost

Within a relevant range:

• Fixed costs per unit are constant.

• Total variable costs are constant.

• Increased production does not require the purchase of additional machinery.

• Total cost per unit increases.

Qualytics Company purchased machinery from Easy Bit, which has guaranteed that the machine will last 10 years. Within the relevant range, as Qualytics increases production:

• Per unit variable cost increases.

• Per unit total costs remain constant.

• Total fixed costs increase.

• Per-unit fixed costs decrease.

To estimate costs using prior data, regression analysis is preferable to the high-low method because:

• Regression analysis is not influenced by data outliers.

• Regression analysis makes use of more data.

• Regression analysis is computationally simpler.

• Regression analysis emphasizes data that are more recent.

Which of the following is not an advantage of using regression analysis to estimate costs rather than the high-low method?

• Regression is likely more accurate because it uses more data points in the calculations.

• Regression uses simpler calculations.

• Regression provides an estimate of fixed costs.

• Regression can be used to predict future costs.

In a regression analysis examining the effect of customer visits on total office costs, R is 0.12. Interpret R.

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Which of the following describes the precision of an estimate in a regression analysis?

• Correlation

• Standard error

• Coefficient

• Margin of safety

Snack Pantry regresses total costs on units produced. Results of the regression indicate a statistically significant coefficient of 2.5 on the units produced variable. How should this result be interpreted?

• Each unit costs an average of $2.50 to produce.

• Each unit has an average variable cost of $2.50.

• Each unit has an average fixed cost of $2.50.

• Each unit has an average labor cost of $2.50.

Which of the following is not used in CVP analysis?

• Fixed cost per unit

• Variable cost per unit

• Total operating income

• Revenue per unit