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m m m m m m m m m
2-1 TestmBankmformDavism&mDavis,mManagerialmAccounting,m4
/e
Chapter 2 m
Cost Behavior and Cost Estimation m m m m
Summary of Questions by Objectives and Bloom’s Taxonomy
m m m m m m m
CHAPTER LEARNING OBJECTIVES
m m
1. Identify basic cost behavior patterns and explain how changes in activit
m m m m m m m m m m
y level affect total cost and unit cost. (Unit 2.1)
m m m m m m m m m
Themtwombasicmcostmbehavior mpatternsmaremvariablemandmfixed.mCostsmthatmaremamcombin
ationmofmthesemtwombasicmpatternsmaremreferredmtomasmmixed.mThemfollowing mtablemshows
m howm thesem costsm changem withm changesm inm activity.
AsmActivity mIncreases AsmActivity mDecreases
CostmBehavior TotalmCost CostmpermUnit TotalmCost Costmper mUnit
Remains Remains
Variable Increases Decreases
constant constant
Remains Remains
Fixed Decreases Increases
constant constant
Mixed Increases Decreases Decreases Increases
2. Estimate a cost equation from a set of cost data and predict future tot
m m m m m m m m m m m m m
al cost from that equation. (Unit 2.2)
m m m m m m
Totalmcostmcanmbemexpressedminmthemformmym=mmxm+mb,mwheremymismthemtotalmcost,mmmismt
hemvariablemcostmpermunit,mxmismthemnumber mofmunits,mandmbm ismthemtotalmfixedmcost.mGive
nmamsetmofmcostsmandmactivitymlevels,myoumcanmestimatemamcostmequationmusing monemofmth
emfollowing mmethods:mscattergraph,mhigh-low,mormregression.
3. Prepare a contribution format income statement. (Unit 2.3)
m m m m m m m
Amcontributionmformatmincomemstatementmismanmincomemstatementmthatmcategorizesmex
pensesmbymtheirmbehavior.mItmfollowsmthemstructure:
Salesmrevenuem–
m Variablem expensesm =m Contributionm marginm Contribution mmargin
m –m Fixed m expensesm =m Operating m income
Besidesmshowing mtotalmsalesmrevenuemandmexpenses,mthemcontributionmformatmstatemen
tmshouldmalsomshowmpermunitmamountsmformsalesmrevenue,mvariablemexpenses,mandmcontr
ibutionmmargin.
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/e
Chapter 2 – Cost Behavior and Cost Estimation
m m m m m m m
TRUE-FALSE STATEMENTS
m
1. Amvariable mcostmismone mthatmvariesminmproportionmtomambusinessmactivity.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
2. Withmamvariable mcost,masmthe mlevelmof mactivitymdecreases,mthe mtotalmcostmremainsmthe msame.
Ans:m Falsem –
m Withm a m variablemcost,mas mthemlevel mof mactivitym decreases,mthem total m costm decreases m bym them samem proportion,m LO:m 1,m Bloo
m:m C,m Unit:m 2-1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
3. Amfixedmcostmismamcostmthatmdoesmnotmchange minmtotalmwithmthe mactivitymlevel.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
4. Withmamfixedmcost,mthe mcostmpermunitmvariesmproportionatelymwithmchangesminmthe mlevelmofmactivity.
Ans:m Falsem –
m Withm a m fixedm cost,m them costm perm unitm varies m inverselym withm changes m inm them level m of m activity,m LO:m 1,m Bloom:m C,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
5. Discretionarymfixedmcostsmare mfixedmcostsmthatmcannotmbe mchangedmovermthe mshortmrun.
Ans:m Falsem –
m Discretionarym fixedm costs m arem fixedm costs m thatm canm bem changedm overm them shortm run,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
6. Anmexample mof mamcommittedmfixedmcostmismwhenmamcompanymsignsmam10-
yearmlease monmanmoffice mbuilding.mAns:mTrue,mLO:m1,mBloom:mC,mUnit:m2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
7. Amcommittedmfixedmcostmismone mthatmcannotmbe mchangedmovermthe mshortmrun.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
8. Companiesmshouldmreduce mfixedmcostsmwhenevermpossible mduringmtimesmof mfallingmprofits.
Ans:m Falsem –
m Companies m shouldm bem careful m aboutm reducing m theirm discretionarym fixedm costs mduring m timesm of mfalling mprofits.m Form exampl
e,m reducing m advertising m ism likelym tomreducem salesmfurther,m exacerbating mthem problem mof mfalling mprofits,mLO:m 1,m Bloom:m C,m U
nit:m 2-1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
9. Stepmcostsmare mfixedmovermonlymamsmallmrange mof mactivity.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
10. Allmcostsmare meithermfixedmormvariable.mThatmis,mamcostmcannotmhavemamfixedmandmamvariable mcompo
nent.mAns:mFalsem–
m Somem costsm havem bothm am fixedm andm amvariablemcomponent.m Thesem costsmaremreferredm tomasmammixedm cost,mLO:m 1,mBloom:
m C,m Unit:m 2-1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
11. Since mammixedmcostmhasmbothmamfixedmandmamvariable mcomponent,mbothmthe mtotalmcostmandmthemuni
tmcostmwillmvarymwithmchangesminmthe mlevelmof mactivity.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
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/e
12. Anmexample mof mamstepmcostmismthe melectricmbillmyoumreceive mformheatingmyourmapartment.
Ans:m Falsem –
m Yourm natural m gas m bill mwouldm bemanm examplem of ma mmixedm cost.m Them basemchargemwouldm bem fixedm andm themadditional m char
gem perm cubicm footm ofm gasm wouldm bem variable,m LO:m 1,m Bloom:m C,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
13. Once myoumknowmhowmamparticularmcostmbehaves,mestimatingmthe mtotalmcostmismrelativelymsimple.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m Decisionm Making,m IMA:m Reporting
14. Three mmethodsmusedmformestimatingmthe mfixedmandmvariable mportionsmofmamcostminclude:mcost-
covermgraphs,mthe mhigh-lowmmethodmandmregressionmanalysis.
Ans:m Falsem –
m Threem methods m usedm form estimating m them fixedm andm variablem portions m of m a m costm includem scattergraphs,m them high-
low m methodm andm regressionm analysis,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
15. Amscattergraphmismsimplymamgraphmthatmshowsmtotalmcostsminmrelationmtomvolume,mormactivitymle
vel.mAns:mTrue,mLO:m2,mBloom:mK,mUnit:m2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
16. The mhigh-
lowmmethodmofmestimatingmthemfixedmandmvariable mcomponentsmofmammixedmcostmismamprecisemapp
roachmthatmusesmamstatisticalmtechnique.
Ans:m Falsem –m Them high-
low m methodm ism am “quickm andm dirty”m method.m Itm doesm notm usem am statistical m technique,m LO:m 2,m Bloom:m C,m Unit:m 2-
m 2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
17. Unlike mthe mscattergraph,mthe mhigh-lowmmethodmrequiresmonlymtwomdatampointsm–
m the m lowestm pointm of m activity m andm the m highestm pointm of m activity.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
18. Tomestimate mthe munitmvariable mcostmusingmthe mhigh-
lowmmethod,midentifymthemhighestmandmlowestmlevelmofmactivitymandmcompute mthemslopemofmthemlin
e.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
19. Regressionmismammoremprecisemmethodmofmestimatingmthemfixedmandmvariable mcomponentsmof mam
mixedmcostmthanmthe mhigh-lowmmethodmormamscattergraph.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
20. Like mthe mhigh-
lowmmethodmof mestimatingmthemfixedmandmvariable mcomponentsmofmammixedmcost,mregressi
onmanalysismusesmamstatisticalmtechnique mthatmidentifiesmthe mline mof mbestmfit.
Ans:m Falsem –m Them high-low m methodm ism notm am statistical m technique,m LO:m 2,m Bloom:m C,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
21. Costmbehaviorsmandmestimatesmare mvalidmonlymwithinmwhatmismreferredmtomasmamprecisionmrange.
Ans:m Falsem –m Costm behaviors m andm estimates m arem validm onlym withinm am relevantm range,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
22. The mrelevantmrange mismthe mnormalmlevelmofmoperatingmactivity.
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Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
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m m m m m m m m m
2-1 TestmBankmformDavism&mDavis,mManagerialmAccounting,m4
/e
Chapter 2 m
Cost Behavior and Cost Estimation m m m m
Summary of Questions by Objectives and Bloom’s Taxonomy
m m m m m m m
CHAPTER LEARNING OBJECTIVES
m m
1. Identify basic cost behavior patterns and explain how changes in activit
m m m m m m m m m m
y level affect total cost and unit cost. (Unit 2.1)
m m m m m m m m m
Themtwombasicmcostmbehavior mpatternsmaremvariablemandmfixed.mCostsmthatmaremamcombin
ationmofmthesemtwombasicmpatternsmaremreferredmtomasmmixed.mThemfollowing mtablemshows
m howm thesem costsm changem withm changesm inm activity.
AsmActivity mIncreases AsmActivity mDecreases
CostmBehavior TotalmCost CostmpermUnit TotalmCost Costmper mUnit
Remains Remains
Variable Increases Decreases
constant constant
Remains Remains
Fixed Decreases Increases
constant constant
Mixed Increases Decreases Decreases Increases
2. Estimate a cost equation from a set of cost data and predict future tot
m m m m m m m m m m m m m
al cost from that equation. (Unit 2.2)
m m m m m m
Totalmcostmcanmbemexpressedminmthemformmym=mmxm+mb,mwheremymismthemtotalmcost,mmmismt
hemvariablemcostmpermunit,mxmismthemnumber mofmunits,mandmbm ismthemtotalmfixedmcost.mGive
nmamsetmofmcostsmandmactivitymlevels,myoumcanmestimatemamcostmequationmusing monemofmth
emfollowing mmethods:mscattergraph,mhigh-low,mormregression.
3. Prepare a contribution format income statement. (Unit 2.3)
m m m m m m m
Amcontributionmformatmincomemstatementmismanmincomemstatementmthatmcategorizesmex
pensesmbymtheirmbehavior.mItmfollowsmthemstructure:
Salesmrevenuem–
m Variablem expensesm =m Contributionm marginm Contribution mmargin
m –m Fixed m expensesm =m Operating m income
Besidesmshowing mtotalmsalesmrevenuemandmexpenses,mthemcontributionmformatmstatemen
tmshouldmalsomshowmpermunitmamountsmformsalesmrevenue,mvariablemexpenses,mandmcontr
ibutionmmargin.
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m m m m m m m m m
2-2 TestmBankmformDavism&mDavis,mManagerialmAccounting,m4
/e
Chapter 2 – Cost Behavior and Cost Estimation
m m m m m m m
TRUE-FALSE STATEMENTS
m
1. Amvariable mcostmismone mthatmvariesminmproportionmtomambusinessmactivity.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
2. Withmamvariable mcost,masmthe mlevelmof mactivitymdecreases,mthe mtotalmcostmremainsmthe msame.
Ans:m Falsem –
m Withm a m variablemcost,mas mthemlevel mof mactivitym decreases,mthem total m costm decreases m bym them samem proportion,m LO:m 1,m Bloo
m:m C,m Unit:m 2-1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
3. Amfixedmcostmismamcostmthatmdoesmnotmchange minmtotalmwithmthe mactivitymlevel.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
4. Withmamfixedmcost,mthe mcostmpermunitmvariesmproportionatelymwithmchangesminmthe mlevelmofmactivity.
Ans:m Falsem –
m Withm a m fixedm cost,m them costm perm unitm varies m inverselym withm changes m inm them level m of m activity,m LO:m 1,m Bloom:m C,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
5. Discretionarymfixedmcostsmare mfixedmcostsmthatmcannotmbe mchangedmovermthe mshortmrun.
Ans:m Falsem –
m Discretionarym fixedm costs m arem fixedm costs m thatm canm bem changedm overm them shortm run,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
6. Anmexample mof mamcommittedmfixedmcostmismwhenmamcompanymsignsmam10-
yearmlease monmanmoffice mbuilding.mAns:mTrue,mLO:m1,mBloom:mC,mUnit:m2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
7. Amcommittedmfixedmcostmismone mthatmcannotmbe mchangedmovermthe mshortmrun.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
8. Companiesmshouldmreduce mfixedmcostsmwhenevermpossible mduringmtimesmof mfallingmprofits.
Ans:m Falsem –
m Companies m shouldm bem careful m aboutm reducing m theirm discretionarym fixedm costs mduring m timesm of mfalling mprofits.m Form exampl
e,m reducing m advertising m ism likelym tomreducem salesmfurther,m exacerbating mthem problem mof mfalling mprofits,mLO:m 1,m Bloom:m C,m U
nit:m 2-1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
9. Stepmcostsmare mfixedmovermonlymamsmallmrange mof mactivity.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
10. Allmcostsmare meithermfixedmormvariable.mThatmis,mamcostmcannotmhavemamfixedmandmamvariable mcompo
nent.mAns:mFalsem–
m Somem costsm havem bothm am fixedm andm amvariablemcomponent.m Thesem costsmaremreferredm tomasmammixedm cost,mLO:m 1,mBloom:
m C,m Unit:m 2-1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
11. Since mammixedmcostmhasmbothmamfixedmandmamvariable mcomponent,mbothmthe mtotalmcostmandmthemuni
tmcostmwillmvarymwithmchangesminmthe mlevelmof mactivity.
Ans:m True,m LO:m 1,m Bloom:m K,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
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/e
12. Anmexample mof mamstepmcostmismthe melectricmbillmyoumreceive mformheatingmyourmapartment.
Ans:m Falsem –
m Yourm natural m gas m bill mwouldm bemanm examplem of ma mmixedm cost.m Them basemchargemwouldm bem fixedm andm themadditional m char
gem perm cubicm footm ofm gasm wouldm bem variable,m LO:m 1,m Bloom:m C,m Unit:m 2-
1,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
13. Once myoumknowmhowmamparticularmcostmbehaves,mestimatingmthe mtotalmcostmismrelativelymsimple.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m Decisionm Making,m IMA:m Reporting
14. Three mmethodsmusedmformestimatingmthe mfixedmandmvariable mportionsmofmamcostminclude:mcost-
covermgraphs,mthe mhigh-lowmmethodmandmregressionmanalysis.
Ans:m Falsem –
m Threem methods m usedm form estimating m them fixedm andm variablem portions m of m a m costm includem scattergraphs,m them high-
low m methodm andm regressionm analysis,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
15. Amscattergraphmismsimplymamgraphmthatmshowsmtotalmcostsminmrelationmtomvolume,mormactivitymle
vel.mAns:mTrue,mLO:m2,mBloom:mK,mUnit:m2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
16. The mhigh-
lowmmethodmofmestimatingmthemfixedmandmvariable mcomponentsmofmammixedmcostmismamprecisemapp
roachmthatmusesmamstatisticalmtechnique.
Ans:m Falsem –m Them high-
low m methodm ism am “quickm andm dirty”m method.m Itm doesm notm usem am statistical m technique,m LO:m 2,m Bloom:m C,m Unit:m 2-
m 2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
17. Unlike mthe mscattergraph,mthe mhigh-lowmmethodmrequiresmonlymtwomdatampointsm–
m the m lowestm pointm of m activity m andm the m highestm pointm of m activity.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
18. Tomestimate mthe munitmvariable mcostmusingmthe mhigh-
lowmmethod,midentifymthemhighestmandmlowestmlevelmofmactivitymandmcompute mthemslopemofmthemlin
e.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
19. Regressionmismammoremprecisemmethodmofmestimatingmthemfixedmandmvariable mcomponentsmof mam
mixedmcostmthanmthe mhigh-lowmmethodmormamscattergraph.
Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
20. Like mthe mhigh-
lowmmethodmof mestimatingmthemfixedmandmvariable mcomponentsmofmammixedmcost,mregressi
onmanalysismusesmamstatisticalmtechnique mthatmidentifiesmthe mline mof mbestmfit.
Ans:m Falsem –m Them high-low m methodm ism notm am statistical m technique,m LO:m 2,m Bloom:m C,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
21. Costmbehaviorsmandmestimatesmare mvalidmonlymwithinmwhatmismreferredmtomasmamprecisionmrange.
Ans:m Falsem –m Costm behaviors m andm estimates m arem validm onlym withinm am relevantm range,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
22. The mrelevantmrange mismthe mnormalmlevelmofmoperatingmactivity.
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Ans:m True,m LO:m 2,m Bloom:m K,m Unit:m 2-
2,m Difficulty:m Easy,m Min:m 1,m AACSB:m Analytic,m AICPAm FN:m Reporting,m AICPAm PC:m None,m IMA:m Reporting
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