Costing - Study Mode

[#331] If residual error is 51 and predicted cost value is 37, then observed cost value will be
Correct Answer

(B) 88

Explanation

Solution: Observed cost value = Residual error + Predicted cost value = 51 + 37 = 88

[#332] In estimation of cost function, an example of independent variable is
Correct Answer

(A) level of activity

Explanation

Solution: In estimation of cost function, an example of independent variable is level of activity. The activity level is the amount of an activity used by a cost object. The concept is employed in activity-based costing. If the activity level can be reduced, then activity costs should decline, thereby reducing the overall expenditure level of a business.

[#333] Formula of 1 - unexplained variation / total variation is used to calculate
Correct Answer

(A) coefficient of determination

Explanation

Solution: Formula of 1 - unexplained variation / total variation is used to calculate coefficient of determination.

[#334] Cause and effect relationship that exists between change in total cost level and change in level of activity, is measured with help of
Correct Answer

(B) cost driver

Explanation

Solution: Cause and effect relationship that exists between change in total cost level and change in level of activity, is measured with help of cost driver. Cost drivers are the actual activities that cause the total cost in an activity cost pool to increase.

[#335] Cost that has elements of variable and fixed costs at same time is
Correct Answer

(D) Both B and C

Explanation

Solution: Cost that has elements of variable and fixed costs at same time is mixed cost and semi variable cost.