# 3 3 questions 1 when managers graph a linear cost function with one cost driver the 4309416

3.3   Questions

1) When managers graph a linear cost function with one cost driver, the intercept represents the ________ cost and the slope represents the ________ cost.

A) variable; fixed

B) fixed; variable

C) fixed; mixed

D) variable; mixed

2) A cause and effect relationship between a ________ and a ________ is desirable in order to obtain accurate and useful cost functions.

A) cost driver; cost function

B) cost function; resource cost

C) cost driver; resource cost

D) step cost; capacity cost

3) When developing cost functions, which of the following statement is FALSE?

A) The cost function must be believable.

B) The cost function should explain past cost behavior.

C) Personal observations of costs and activities provide the best evidence of a plausible relationship between a cost and its cost driver.

D) The cost function does not have to be reliable.

4) An algebraic equation used by managers to describe the relationship between a cost and its cost driver(s) is called a ________.

A) cost behavior

B) cost function

C) cost system

D) cost analysis

5) Merkey Motel's cost function is given as:

Y = \$50,000 + \$7.50X

Where:

Y = annual custodial cost

X = number of guest-days of occupancy

In the current year, Merkey Motel has 8,000 guest days.  In the next year, Merkey Motel expects an occupancy level of 10,000 guest days.  (All costs next year will remain in the same relevant range as the current year.)  What is the expected fixed custodial cost for next year?

A) \$7.50

B) \$50,000

C) \$62,500

D) \$75,000

6) Moonlight Motel's cost function is given as:

Y = \$50,000 + \$7.50X

Where:

Y = annual custodial cost

X = number of guest-days of occupancy

In the current year, Moonlight Motel has 8,000 guest days.  In the next year, Moonlight Motel expects an occupancy level of 10,000 guest days.  (All costs next year will remain in the same relevant range as the current year.)  What is the expected total variable custodial cost for next year?

A) \$60,000

B) \$75,000

C) \$125,000

D) \$137,500

7) Sunrise Motel's cost function is given as:

Y = \$50,000 + \$7.50X

Where:

Y = annual custodial cost

X = number of guest-days of occupancy

In the current year, Sunrise Motel has 8,000 guest days.  In the next year, Sunrise Motel expects an occupancy level of 10,000 guest days.  (All costs next year will remain in the same relevant range as the current year.)  What is the expected total custodial cost for next year?

A) \$50,000

B) \$62,500

C) \$125,000

D) \$137,500

8) In a mixed-cost linear function with one cost driver, the intercept is the ________ and the slope is the ________.

A) fixed cost; step cost

B) fixed cost; variable cost

C) variable cost; fixed cost

D) variable cost; step cost

9) Consider the following linear mixed-cost function:

Y = \$72,000 + \$7.70X

Where: Y = total annual maintenance cost

X = number of patient-days

What does the \$72,000 represent?

A) variable cost per patient-day

B) total variable cost

C) fixed cost per patient-day

D) total fixed cost

10) Consider the following linear mixed-cost function:

Y = \$72,000 + \$7.70X

Where: Y = total annual custodial cost

X = number of patient-days

What does the \$7.70 represent?

A) variable cost per patient-day

B) total variable cost

C) fixed cost per patient-day

D) total fixed cost

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