Exam 2: Cost Concepts, Behaviour and Estimation

Hifi Company wants to develop a cost function for its maintenance costs to estimate such costs for the coming year. The following data are available: Manth Machine Hours Maintenance Costs Incurred January February 13000 \ 5,300 March 14000 \ 6,000 April 11000 \ 4,600 Using the high-low method, what is the fixed maintenance cost?

In most accounting information systems, costs are often recorded and coded so they can be summarised based on different:

When comparing the Adjusted R-squares from multiple regressions the best equation is represented by the regression with the lowest Adjusted R-square.

Total variable costs:

Changes in cost behaviour due to inflation or deflation is one source of uncertainty in estimating future costs.

The relevant range for an organisation never changes.

One method for determining cost functions that relies on past costs is regression analysis.

Consider the following cost data for the cost object, number of machine setups. Each set of costs (A, B, and C) is from a different type of manufacturing operation and represents the cost behaviour for the cost of that company's machine setups. Number of 0 10 20 30 40 50 \ 0 20 40 60 80 100 \ 80 79 82 78 81 79 \ 5 37 66 91 123 154 Cost A is best described as:

Design fashion has an average overhead cost per hour of $21.00 at 3,500 machine hours, and at 3,000 hours it is $22.50. The company managers wish to estimate the overhead cost function. What is the fixed overhead cost?

Which of the following are disadvantages of the high low method:

Regression analysis usually provides a higher quality cost function than the high-low method.

The high low method is useful when there are limited data points to observe.

Past cost information might be too unreliable for future cost estimation because:

The relevant range is defined as:

It is necessary to know the relevant range for regression analysis.

Highland Rose Ltd is attempting to develop the cost function for repair costs. The following past data are available: 4,800 \ 6,385 3,400 4,585 4,000 5,285 5,900 7,085 Using the high-low method, what is the estimated repair cost for 4,500 machine hours?

Mixed costs:

The analysis at the account level method can be used when there is no past cost information available.

Cost estimates that are based on resources used is a characteristic of the engineered estimate of cost method.

Which of the following is an alternative name for a cost driver in a regression analysis?