1.

The longer the time horizon, the more likely that a cost will have a fixed cost
behavior.

Answer: False Difficulty: 2 Objective: 2

Terms to Learn: cost function, linear cost function
The longer the time horizon, the more likely a cost will be variable.

2. Outside of the relevant range, variable and fixed cost-behavior patterns may change.

Answer: True Difficulty: 2 Objective: 2

Terms to Learn: cost function, linear cost function

3. Any linear cost function can be graphed by knowing only the slope coefficient.

Answer: False Difficulty: 1 Objective: 2

Terms to Learn: cost function, linear cost function
A linear function can be graphed if the slope coefficient and the intercept are known.

4. Knowing the proper relevant range is essential to properly classify costs.

Answer: True Difficulty: 1 Objective: 2

Terms to Learn: cost function

5. It can be inferred that when there is a high correlation between two variables, one is
the cause of the other.

Answer: False Difficulty: 2 Objective: 2

Terms to Learn: cost function
It cannot be inferred that a high correlation between two variables indicates that one is
the cause of the other. A high correlation simply indicates that the variables move
together.

6. An example of a physical cause-and-effect relationship is when additional units of

production increase total direct material costs.

Answer: True Difficulty: 2 Objective: 2

Terms to Learn: cost function

7. The industrial engineering method of cost estimation is based on opinions from

various departments and is quick and of low cost to apply.

Answer: False Difficulty: 1 Objective: 3

Terms to Learn: cost estimation, industrial engineering method
The conference method of cost estimation is based on opinions from various
departments and is quick and of low cost to apply.