Exam 23: Cost Estimation and Cost Behaviour

English Ltd. analyzed the relationship between total factory overhead and changes in direct labour hours. It found the following: Y = £6,000 + £6X The Y in the equation is an estimate of

What is the difference between a correlation equal to -1 and a correlation equal to 0?

The scatterplot method of cost estimation

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 individual unit time (labour hours) to produce 2,000 units?

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

The percentage change in the dependent variable that is explained by the change in the independent variable is measured by the

The following computer printout estimated overhead costs using multiple regression: Which slope and intercept parameters are significant at the 0.05 level?

Kane Ltd. found its maintenance cost and sales revenues to be somewhat correlated. Last year's high and low observations were as follows: What is the fixed portion of the maintenance cost?

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

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

Greene Enterprises has the following information about its truck fleet miles and operating costs: What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2008 is 500,000 miles?

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

Innova, SA., is beginning the production of a new product. Management believes that 500 labour hours will be required to complete the new unit. A 90 percent cumulative average-time learning curve model for direct labour hours is assumed to be valid. Data on costs are as follows: Required: a. Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and cumulative total time in hours using the cumulative average-time learning curve. Complete the table for 1, 2, 4, and 8 units. b. Set up a similar table assuming an 80 percent with the cumulative average-time learning curve. c. What is the difference in variable cost of producing four units?

The following information was available about supplies cost for the first three months of the year: Using the high-low method, an estimate of supplies cost at 4,500 units of production would be

SeyChy collected the following data on manufacturing costs and activity cost drivers for two months: Required:

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 R-squared in the regression output would represent:

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

The following computer printout estimated overhead costs using multiple regression: The model being measured is

Figure 23-1 Lee Ltd. manufactures and sells party items. The following representative direct labour hours and production costs are provided for a four-month period: Let a = Fixed production costs per month b = Variable production costs per direct labour hour n = Number of months X = Direct labour hours per month Y = Total monthly production costs $\Sigma$ = Summation -Refer to Figure 23-1. The cost function derived by the least-squares cost estimation method

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