11) Managers apply two criteria to obtain accurate and useful cost functions. These criteria are ________.
A) plausibility and believability
B) plausibility and reliability
C) reliability and validity
D) believability and plausibility
12) In relation to a cost function, the term reliability means ________.
A) whether the costs and activities can be easily observed
B) whether the cost function conforms to a given mathematical model
C) how well the cost function predicts future costs
D) how well the cost function explains past cost behavior
13) A cost function is an algebraic equation used to describe the relationship between a cost and its cost driver(s).
14) Managers should apply plausibility and reliability to obtain accurate and useful cost functions.
15) When referring to a cost function, plausibility refers to whether you can rely upon the cost function for predicting the future.
16) In a linear mixed cost function, the slope of the function is the fixed cost per unit of the cost driver.
17) Goodness of fit pertains to how well a cost function predicts cost behavior.
18) Cleveland Recreation Center is planning its annual fundraiser. The event committee has developed the following budget for the event.
Ballroom rental$2,900
Entertainment$4,500
Printing$600 plus $9 per guest
Food$29 per guest
Decorations$700 plus $5 per guest
The committee expects 3,000 people will attend the event.
Required:
A) Compute the fixed and variable costs of the event.
B) Prepare the cost function.
C) If Cleveland Recreation charges $100 per person, how much money will be raised by this event?
