Three Different Divisions of a University Are Estimating Costs for Their

question 119

Multiple Choice

Three different divisions of a university are estimating costs for their human resources departments. Each division has a cost structure that is different from the other divisions and those structures are represented by the following cost behaviour patterns.
$\begin{array}{c}\begin{array}{c}\text {Number of}\\\underline{\text {Employees}}\\0 \\25\\ 50\\ 75\\ 100\end{array}\begin{array}{c}\\\underline{\text { Cost A }} \\ \$ 0 \\50 \\100 \\125 \\200\end{array}\begin{array}{c}\\\underline{\text { Cost B} } \\\$ 120 \\118 \\123 \\124 \\119\end{array}\begin{array}{c}\\\underline{\text { Cost C} } \\\$ 118 \\180 \\245 \\296\\360 \end{array}\end{array}$

Which cost is best described as variable?

• A) Cost A
• B) Cost B
• C) Cost C
• D) Cost A and Cost C

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Definitions:

Operating Capacity

The maximum output a company can produce using its current resources, without compromising quality or efficiency.

Future Cash Flows

These are the estimated amounts of money expected to be received or paid out in the future as a result of current investments, operations, or financial decisions.

Pro Forma Financial Statements

Financial statements that project the future financial position of a company based on current data and assumptions about future events.

Worst-Case Scenarios

The most adverse, yet possible, outcomes that can occur under certain conditions.