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 PAGE 58 Copyright ? 2012 Pearson Education, Inc. Cost Accounting, 14e (Horngren/Datar/Rajan) Chapter 10 Determining How Costs Behave Objective 10.1 1) Which of the following statements related to assumptions about estimating linear cost functions is FALSE? A) Variations in a single cost driver explain variations in total costs. B) A cost object is anything for which a separate measurement of costs is desired. C) A linear function approximates cost behavior within the relevant range of the cost driver. D) A high correlation between two variables ensures that a cause-and-effect relationship exists. Answer: D Diff: 2 Terms: cost estimation, linear cost function Objective: 1 AACSB: Reflective thinking 2) A high correlation between two variables s and t indicates that: A) s may cause t, or t may cause s B) both may be affected by a third variable C) the correlation may be due to random chance D) All of these answers are correct. Answer: D Diff: 2 Terms: cost function Objective: 1 AACSB: Reflective thinking 3) Which of the following does NOT represent a cause-and-effect relationship? A) Material costs increase as the number of units produced increases. B) A company is charged 40 cents for each brochure printed and mailed. C) Utility costs increase at the same time that insurance costs increase. D) It makes sense that if a complex product has a large number of parts it will take longer to assemble than a simple product with fewer parts. Answer: C Diff: 3 Terms: cost function Objective: 1 AACSB: Reflective thinking 4) Bennet Company employs 30 individuals. Eighteen employees are paid $14 per hour and the rest are salaried employees paid $4,000 a month. How would total costs of personnel be classified? A) variable B) mixed C) a variable cost within a relevant range D) a fixed cost within a relevant range Answer: B Diff: 2 Terms: mixed cost Objective: 1 AACSB: Analytical skills 5) McGuinness Company employs 8 individuals. They are al