1. Briefly describe an organization with which you are familiar. Describe a situation when a manager in that organization could use cost behavior information and how the manager could use the information.
2. How are fixed costs similar to step fixed costs? How are fixed costs different from step fixed costs? Give an example of a step fixed cost and describe why that cost is not considered to be a fixed cost.
3. Describe a specific situation when a scatter plot could be useful to a manager.
4. What is a mixed cost? Give an example of a mixed cost. Sketch a graph of this example.
5. Compare discretionary fixed costs to committed fixed costs. Think of an organization with which you are familiar. Give two examples of discretionary fixed costs and two examples of committed fixed costs which that organization may have. Explain why the costs you have chosen as examples fit within the definitions of “discretionary fixed costs” and “committed fixed costs.”
6. Define the terms “independent variable” and “dependent variable,” as used in regression analysis. Illustrate the concepts of independent variables and dependent variables by selecting a cost a company would want to predict and what activity it might use to predict that cost. Describe the independent variable and the dependent variable in that situation.
7. Define the term “relevant range.” Why is it important to managers?
8. Describe the term “R-square.” If a regression analysis for predicting manufacturing over-head using direct labor hours as the dependent variable has an R- square of 0.40, why might this be a problem? Given the low R- square value, describe the options a manager has for predicting manufacturing overhead costs. Which option do you think is the best option for the manager? Defend your answer.
9. Over the past year, a company’s inventory has increased significantly. The company uses absorption costing for financial statements, but internally, the company uses variable costing for financial statements. Which set of financial statements will show the highest operating income? What specifically causes the difference between the two sets of financial statements?
10. A company has adopted a lean production philosophy and, as a result, has cut its inventory levels significantly. Describe the impact on the company’s external financial statements as a result of this inventory reduction. Also describe the impact of the inventory reduction on the company’s internal financial statements that are prepared using variable costing.
11. What costs might a business incur by not adopting paperless services? Is paperless only profitable to large businesses or is it applicable to small businesses? Explain what factors might be involved in changing over to paperless billing.
12. How might the principles of sustainability (such as increased efficiency) affect cost behavior overall? Think of an example of a sustainable change in process or material that could impact the cost equation for that cost (i. e., the total fixed cost versus the variable cost per unit). Describe this example in detail and what might happen to total fixed costs and per unit variable costs.