Question 1

The appropriate range for the coefficient of correlation (r) is

Accepted Answer

A) 0 $\le$ r $\le$ 1. 
B) -% $\le$r $\le$ +%. 
C) -1 $\le$r $\le$ 1. 
D) -1 $\le$ r $\le$ +%. 
A) 0 $\le$ r $\le$ 1. 
B) -% $\le$r $\le$ +%. 
C) -1 $\le$r $\le$ 1. 
D) -1 $\le$ r $\le$ +%.

Question 2

Hook Company wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data: $$\begin{array} { c c c } 
\text { Month } & \text { Cost of Electricity } & \text { Direct labour Hours } \
\text { January } & £ 8,100 & 750 \
\text { April } & 9,000 & 850 \
\text { July } & 10,200 & 1,000 \
\text { October } & 8,700 & 800
\end{array}$$ Using the high-low method, which of the following is the best equation?

Accepted Answer

A) Y = £900 + £12.00X 
B) Y = £900 + £8.40X 
C) Y = £1,800 + £8.40X 
D) Y = £2,400 + £8.40X 
A) Y = £900 + £12.00X 
B) Y = £900 + £8.40X 
C) Y = £1,800 + £8.40X 
D) Y = £2,400 + £8.40X

Question 3

Assume the following information: $$\begin{array} { l c } 
\text { Volume } & \text { Total Cost } \
80 \text { units } & £ 1,200 \
88 \text { units } & £ 1,300 \
96 \text { units } & £ 1,400
\end{array}$$ What is the variable cost per unit?

Accepted Answer

A) £15.00 
B) £14.78 
C) £13.75 
D) £12.50 
A) £15.00 
B) £14.78 
C) £13.75 
D) £12.50

Question 4

Which of the following is a strength of the high-low advantage method?

Accepted Answer

A) Only two observations are used to develop the cost function. 
B) The high and low activity levels may not be representative. 
C) The method does not detect if the cost behaviour is nonlinear. 
D) The method is easy to apply. 
A) Only two observations are used to develop the cost function. 
B) The high and low activity levels may not be representative. 
C) The method does not detect if the cost behaviour is nonlinear. 
D) The method is easy to apply.

Question 5

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

Accepted Answer

A) slope. 
B) intercept. 
C) dependent variable. 
D) total variable costs. 
A) slope. 
B) intercept. 
C) dependent variable. 
D) total variable costs.

Question 6

Greene Enterprises has the following information about its truck fleet miles and operating costs: $$\begin{array} { c c c } 
\text { Year } & \text { Miles } & \text { Operating Costs } \
2005 & 400,000 & £ 256,000 \
2006 & 480,000 & 280,000 \
2007 & 560,000 & 320,000
\end{array}$$ What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2008 is 500,000 miles?

Accepted Answer

A) £288,000 
B) £296,000 
C) £256,000 
D) £320,000 
A) £288,000 
B) £296,000 
C) £256,000 
D) £320,000

Question 7

Which of the following is a weakness of the high-low method?

Accepted Answer

A) The method is easy to apply because only two observations are required to develop the cost function. 
B) The data points used may represent atypical cost-activity relationships. 
C) Any two observers will arrive at the same conclusion. 
D) The method is quick to use and easy to understand. 
A) The method is easy to apply because only two observations are required to develop the cost function. 
B) The data points used may represent atypical cost-activity relationships. 
C) Any two observers will arrive at the same conclusion. 
D) The method is quick to use and easy to understand.

Question 8

Rush Company is trying to find an appropriate allocation base for factory overhead. Presented are five months of data: $$\begin{array} { l c c c } 
\text { Month } & \text { Direct labour Hours } & \text { Machine Hours } & \text { Factory Overhead } \
\text { January } & 10 & 3 & £ 45 \
\text { February } & 20 & 5 & 75 \
\text { March } & 15 & 4 & 70 \
\text { Apri1 } & 30 & 5 & 130 \
\text { May } & 25 & 3 & 80
\end{array}$$ r = $$\frac { \sum ( X - X ) ( Y - Y ) } { \left( \sum ( X - X ) ^ { 2 } \sum ( Y - Y ) ^ { 2 } \right) ^ { 5 } }$$ 
a.Calculate the correlation coefficient between factory overhead and direct labour hours.
b.Calculate the correlation coefficient between factory overhead and machine hours.
c.Should Rush Company use direct labour hours or machine hours for their allocation base for factory overhead? Why?

Accepted Answer

a.
 . The higher correlation i

Question 9

The following information is available for electricity costs for the last six months of the year: $\begin{array}{lll}\text { Month }& \text { Production Volume } &\text { Electricity Costs }\
\text { July } & 1,400 & £ 3,150 \
\text { August } & 2,800 & 5,400 \
\text { September } & 3,200 & 5,700 \
\text { October } & 1,750 & 3,900 \
\text { November } & 1,200 & 2,400 \
\text { December } & 2,100 & 4,050
\end{array}$ Using the high-low method, estimated variable cost per unit of production is

Accepted Answer

A) £1.26. 
B) £1.53. 
C) £1.65. 
D) £1.77. 
A) £1.26. 
B) £1.53. 
C) £1.65. 
D) £1.77.

Question 10

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 constant in the regression output would represent:

Accepted Answer

A) the estimated monthly total costs of the sales department. 
B) the estimated monthly fixed costs of the sales department. 
C) the estimated monthly variable costs per unit of the sales department. 
D) the percent of variation in Y that is explained by X. 
A) the estimated monthly total costs of the sales department. 
B) the estimated monthly fixed costs of the sales department. 
C) the estimated monthly variable costs per unit of the sales department. 
D) the percent of variation in Y that is explained by X.

Question 11

The high-low method may give unsatisfactory results if

Accepted Answer

A) the data points all fall on a line. 
B) volume of activity is heavy. 
C) volume of activity is light. 
D) the points are unrepresentative. 
A) the data points all fall on a line. 
B) volume of activity is heavy. 
C) volume of activity is light. 
D) the points are unrepresentative.

Question 12

Innova, SA., is beginning the production of a new product. Management believes that 500 labour hours will be required to complete the new unit. An 80 percent incremental unit-time learning curve model for direct labour hours is assumed to be valid. Assume that the exponent b = -0.3219. Data on costs are as follows: $\begin{array}{ll}
\text { Direct materials } & £ 50,000 \text { per unit } \
\text { Direct labour } & £ 20 \text { per direct labour hour } \
\text { Variable manufacturing overhead } & £ 30 \text { per direct labour hour }
\end{array}$ 
a.Set up a table with columns for cumulative number of units showing the cumulative total time in hours using the incremental unit-time learning curve. Complete the table for 1, 2, 3, and 4 units given the individual unit time for the nth unit as 500, 400, 351, and 320 for 1 to 4 units respectively.
b.Set up a similar table assuming a 90 percent with the incremental unit-time learning curve with the individual unit time for the nth unit as 500, 450, 430, 405 for 1 to 4 units respectively.
c.What is the difference in variable cost of producing four units?

Accepted Answer

a.
 , and

Question 13

Weaknesses of the high-low method include all of the following EXCEPT

Accepted Answer

A) only two observations are used to develop the cost function. 
B) the high and low activity levels may not be representative. 
C) the method does not detect if the cost behaviour is nonlinear. 
D) the method is relatively complex and difficult to apply. 
A) only two observations are used to develop the cost function. 
B) the high and low activity levels may not be representative. 
C) the method does not detect if the cost behaviour is nonlinear. 
D) the method is relatively complex and difficult to apply.

Question 14

The following information was available about supplies cost for the second quarter of the year: $\begin{array}{ccc}
\text { Month } & \text { Production Volume } & \text { Supplies Cost } \
\text { April } & 700 & £ 3,185 \
\text { May } & 1,600 & 7,100 \
\text { June } & 600 & 2,700
\end{array}$ Using the high-low method, the estimate of supplies cost at 1,000 units of production is

Accepted Answer

A) £2,700. 
B) £4,460. 
C) £4,900. 
D) £7,100. 
A) £2,700. 
B) £4,460. 
C) £4,900. 
D) £7,100.

Question 15

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

Accepted Answer

A) a statistical method is used to mathematically derive the cost function. 
B) only two points are used to develop the cost function. 
C) the squared differences between actual observations and the line (cost function) are minimized. 
D) all the observations have an effect on the cost function. 
A) a statistical method is used to mathematically derive the cost function. 
B) only two points are used to develop the cost function. 
C) the squared differences between actual observations and the line (cost function) are minimized. 
D) all the observations have an effect on the cost function.

Question 16

SeyChy collected the following data on manufacturing costs and activity cost drivers for two months: $\begin{array}{lcc}
&\text { November }& \text { December }\
\text { Activity level in units } & 3,000 & 7,500 \\
\text { Variable costs } & £ 7,500 & £ ? \
\text { Fixed costs } & 25,000 & ? \
\text { Mixed costs } & 11,500& 13,750\
\text { Total manufacturing costs } &? &?
\end{array}$
 
a.What is total variable cost per unit?
b.What is the total fixed cost?
c.What is the estimated total manufacturing cost for January if the budgeted activity in January is 6,000 units?

Accepted Answer

None

Question 17

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

Accepted Answer

A) slope. 
B) intercept. 
C) dependent variable. 
D) independent variable. 
A) slope. 
B) intercept. 
C) dependent variable. 
D) independent variable.

Question 18

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

Accepted Answer

A) slope. 
B) intercept. 
C) dependent variable. 
D) independent variable. 
A) slope. 
B) intercept. 
C) dependent variable. 
D) independent variable.

Question 19

Which of the following decision-making tools would NOT be useful in determining the slope and intercept of a mixed cost?

Accepted Answer

A) linear programming 
B) least-squares method 
C) high-low method 
D) scatter diagrams 
A) linear programming 
B) least-squares method 
C) high-low method 
D) scatter diagrams

The appropriate range for the coefficient of correlation (r) is

Assume the following information: Volume Total Cost 80 units £1,200 88 units £1,300 96 units £1,400 What is the variable cost per unit?

Which of the following is a strength of the high-low advantage method?

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

Which of the following is a weakness of the high-low method?

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 constant in the regression output would represent:

The high-low method may give unsatisfactory results if

Weaknesses of the high-low method include all of the following EXCEPT

The following information was available about supplies cost for the second quarter of the year: Month Production Volume Supplies Cost April 700 £3,185 May 1,600 7,100 June 600 2,700 Using the high-low method, the estimate of supplies cost at 1,000 units of production is

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

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

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

Which of the following decision-making tools would NOT be useful in determining the slope and intercept of a mixed cost?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Activity-Based Costing

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Strategic Cost Management

Strategic Performance Management

Quantitative Models for the Planning and Control of Inventories

The Application of Linear Programming to Management Accounting

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Exam 23: Cost Estimation and Cost Behaviour

The appropriate range for the coefficient of correlation (r) is

Assume the following information: Volume Total Cost 80 units £1,200 88 units £1,300 96 units £1,400 What is the variable cost per unit?

Which of the following is a strength of the high-low advantage method?

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

Which of the following is a weakness of the high-low method?

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 constant in the regression output would represent:

The high-low method may give unsatisfactory results if

Weaknesses of the high-low method include all of the following EXCEPT

The following information was available about supplies cost for the second quarter of the year: Month Production Volume Supplies Cost April 700 £3,185 May 1,600 7,100 June 600 2,700 Using the high-low method, the estimate of supplies cost at 1,000 units of production is

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

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

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

Which of the following decision-making tools would NOT be useful in determining the slope and intercept of a mixed cost?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost Assignment

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Activity-Based Costing

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Strategic Cost Management

Strategic Performance Management

Quantitative Models for the Planning and Control of Inventories

The Application of Linear Programming to Management Accounting

Filters