In Describing the Cost Formula Equation Y = a

question 25

Multiple Choice

In describing the cost formula equation Y = a + bX,which of the following statements is correct?

• A) The X term is the dependent variable.
• B) The a term is the fixed component.
• C) In the high-low method, the b term equals change in activity divided by change in costs.
• D) As the X term increases, the Y term decreases.

---

Definitions:

Actual Rate

The real interest rate or exchange rate that is applied in current transactions, distinct from theoretical or future rates.

Standard Rate

A predetermined cost or price used in budgeting and costing exercises, reflecting an expected or agreed level of expenditure or charge.

Variable Factory Overhead Controllable Variance

The difference between the actual and budgeted variable overhead costs that management has the ability to influence or control.

Actual Hours

The real number of hours worked or spent on a particular activity or project, as opposed to planned or estimated hours.