When Managers Use Their Judgment to Classify Costs as Variable

question 315

Multiple Choice

When managers use their judgment to classify costs as variable, fixed, or mixed, which method are they using?

• A) Account analysis
• B) High-low method
• C) Regression analysis
• D) Low-high method

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Definitions:

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard amount expected to be used, multiplied by the standard cost of those materials.

Inferior Materials

Materials of lower quality than standard, which may affect the quality of finished goods and potentially reduce manufacturing costs.

Budgeted Unit Sales

The projected quantity of products a company expects to sell over a certain period, based on budgeting processes.

Budgeted Cost

An estimated financial amount allocated for a specific purpose, project, or time period.