Exam 23: Cost Estimation and Cost Behaviour

The scatterplot method of cost estimation

In the method of least squares, the deviation is the difference between the

A managerial accountant has determined the following relationships between overhead and several possible bases: Basis Correl ation with Total Overhead Direct labour hours 0.842 Direct labour (£) 0.279 Machine hours -0.837 Empl oyee minutes in coffee breaks -0.243 The best basis for overhead application is

What does a correlation coefficient near 0 mean?

The following computer printout estimated overhead costs using multiple regression: t for H(0) Std. error Parameter Estimate Parameter =0 P r >t of parameter Intercept 1000 1.96 0.0250 510.204 Setup hours 25 81.96 0.0001 0.305 \# of parts 100 9.50 0.0001 10.527 R Square 0.94 Standard Error 75.00 Observations 160 Which slope and intercept parameters are significant at the 0.05 level?

What does a correlation coefficient near +1 mean?

If the independent variable is production volume and the dependent variable is total manufacturing cost, a coefficient of determination of .90 indicates

Silversleeves, SA., shipped 18,000 tons of silver for £450,000 in January and 22,000 tons for £549,000 in February. Shipping costs for 21,000 tons to be shipped in March would be expected to be

Baker Enterprises developed a cost function for manufacturing overhead costs of Y = £8,000 + £1.60X. Estimated manufacturing overhead costs at 10,000 units of production are

Kane Ltd. found its maintenance cost and sales revenues to be somewhat correlated. Last year's high and low observations were as follows: Maintenance Cost Sales £36,000 £400,000 £42,000 £600,000 What is the fixed portion of the maintenance cost?

Abboud Company is planning to introduce a new product with an 80 percent incremental unit-time learning curve for production for batches of 1,000 units. The variable labour costs are £30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are £10,000 in fixed costs not subject to learning. What is the cumulative total time (labour hours) to produce 2,000 units?

Figure 23-3 Abboud Company is planning to introduce a new product with an 80 percent cumulative learning curve for production for batches of 1,000 units. The variable labour costs are £30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are £10,000 in fixed costs not subject to learning. -Refer to Figure 23-3. What is the cumulative total time (labour hours) to produce 2,000 units?

What is the difference between a correlation equal to -1 and a correlation equal to +1?

If the coefficient of correlation between machine hours and utilities cost is equal to 0.98 (r = 0.98), the correlation is

Which method can be used to estimate the cost function?

In the formula Y = a + bx, a refers to the

In a simple least-squares regression where X refers to the number of sales calls made by a sales department and Y refers to the monthly total cost of the sales department, the value of X in the regression output would represent:

Advantages of the method of least squares over the high-low method include all the following EXCEPT

Which of the following statements is NOT true?

The following cost functions were developed for manufacturing overhead costs: Manufacturing Overhead Cost Cost Function Electricity £400+£140 per direct labour hour Maintenance £800+£40 per direct labour hour Supervisors' salaries £16,000 per month Indirect materials £50 per direct labour hour If July production is expected to be 200 units that require 300 direct labour hours, estimated manufacturing overhead costs would be