1. Which of the following statements is true?
a. A cost may be simultaneously direct and indirect to different cost objectives.
b. Indirect costs can be identifi ed specifi cally with a given cost objective in an economically feasible way.
c. Direct costs cannot be identifi ed specifi cally with a given cost objective in an economically feasible way.
d. Managers prefer to classify costs as indirect rather than direct.

2. Some costs change abruptly at intervals of activity because the resources and their costs come in indivisible chunks. What is the name for these costs?
a. Mixed costs
b. Step wise costs
c. Variable costs
d. Sunk costs

Use the following information to answer Questions

3. What is the variable cost?
a. $8.71
b. $9.00
c. $9.38
d. $9.69

4. What is the cost function for the maintenance cost?
a. Y = $562 + 9.69X
b. Y = $1,223 + 9.38X
c. Y = $2,500 + 9.00X
d. Y = $3,100 + 8.71X

5. KEI Ltd. expects to use 2,650 machine hours in July.
What would be the total maintenance cost, based on
the cost function derived in Question 2.19?
a. $26,092
b. $26,193
c. $26,246
d. $26,350

Transcribed Image Text:

Month Machine Hours Maintenance Cost $21,400 $21,400 $24,850 $27,700 $27,500 $24,100 January February 2,150 2,100 2,400 2,800 2,800 2,500 March April May June