Exam 10: Determining How Costs Behave

To complete the first setup on a new machine took an employee 200 minutes. Using an 64% incremental unit-time learning model indicates that the second setup on the new machine is expected to take ________.

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Question 1

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A step cost functions indicates that there are

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Question 2

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Discuss the potential use of nonlinear curves in cost functions and cost analysis. Give some examples.

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Question 3

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Cost functions are not always linear. A nonlinear cost function is a cost function for which the graph of total costs is not a straight line within the relevant range of operations. One example is a series of straight line segments that change their slopes at critical intersection points within the range of operation. Another example would be a step function. A step function is a function where the cost remains the same over various ranges of the level of activity, but the cost increases by discrete amounts (or steps) as the level of activity advances from one range to another. In addition to the examples mentioned above, there are situations where the cost or use of resources can be represented by a curve instead of a single straight line or a group of segmented straight lines. One example of a curve is a learning curve. A learning curve is a function that measures how labor-hours per unit decline as units of production increase because workers are learning and becoming better at their jobs.

Which of the following is the mathematical expression to calculate the coefficient of determination?

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Question 4

Because the cost driver is the same for the fringe benefits of life insurance and pension benefits cost is the same, those costs can be aggregated into one homogeneous cost pool.

(True/False)

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Question 5

The quantitative analysis method uses a formal mathematical method to identify cause-and-effect relationships among past data observations.

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Question 6

What is a plausible explanation of a cost function has a slope coefficient of $30 for purchases of 1 to 1,000 units and $25 for production of 1,100 - 2,000 units, and $20 for production of 2,001 - 3,000 units

(Multiple Choice)

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Question 7

The cost to be predicted and managed is referred to as the ________.

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Question 8

The major advantages of quantitative methods are that they are objective, so managers can use them to evaluate different cost drivers.

(True/False)

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Question 9

Multiple regression analysis estimates the relationship between the dependent variable and two or more independent variables.

(True/False)

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Question 10

Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.

(True/False)

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Question 11

Which of the following statements shows a difference between simple regression and multiple regression?

(Multiple Choice)

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Question 12

M & G TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. Which cost estimation method is being used by M & G TV and Appliance Store?

(Multiple Choice)

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Question 13

At the Wild Cat Group Company, the cost of the library and information center has always been charged to the various departments based upon number of employees. Recently, opinions gathered from the department managers indicate that the number of engineers within a department might be a better predictor of library and information center costs. Total library and information center costs are $215,000. If the number of engineers is considered the cost driver, what amount of library and information center costs will be allocated to Department A? (Round any intermediary calculations two decimal places and your final answer to the nearest dollar.)

(Multiple Choice)

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Question 14

The t-value of a coefficient measures how large the value of the estimated coefficient is relative to its standard error.

(True/False)

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Question 15

South by Southwest Company used least squares regression analysis to obtain the following output: Required: a.What is the total fixed cost? b.What is the variable cost per employee? c.Prepare the linear cost function. d.What is the coefficient of determination? Comment on the goodness of fit.

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Question 16

A finance manager has to select one of the four different suppliers of raw materials. The total cost functions under the four options are given below. Assume the quality of the raw material to be the same, which of the following is preferred by the finance manager?

(Multiple Choice)

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Question 17

Which of the following statements is true of a linear cost function?

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Question 18

Goodness-of-fit measures how well the predicted values in a cost estimating equation ________.

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Question 19

Which of the following is a problem related to cost analysis?

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Question 20

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Exam 10: Determining How Costs Behave

To complete the first setup on a new machine took an employee 200 minutes. Using an 64% incremental unit-time learning model indicates that the second setup on the new machine is expected to take ________.

A step cost functions indicates that there are

Discuss the potential use of nonlinear curves in cost functions and cost analysis. Give some examples.

Which of the following is the mathematical expression to calculate the coefficient of determination?

Because the cost driver is the same for the fringe benefits of life insurance and pension benefits cost is the same, those costs can be aggregated into one homogeneous cost pool.

The quantitative analysis method uses a formal mathematical method to identify cause-and-effect relationships among past data observations.

What is a plausible explanation of a cost function has a slope coefficient of $30 for purchases of 1 to 1,000 units and $25 for production of 1,100 - 2,000 units, and $20 for production of 2,001 - 3,000 units

The cost to be predicted and managed is referred to as the ________.

The major advantages of quantitative methods are that they are objective, so managers can use them to evaluate different cost drivers.

Multiple regression analysis estimates the relationship between the dependent variable and two or more independent variables.

Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.

Which of the following statements shows a difference between simple regression and multiple regression?

M & G TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. Which cost estimation method is being used by M & G TV and Appliance Store?

The t-value of a coefficient measures how large the value of the estimated coefficient is relative to its standard error.

South by Southwest Company used least squares regression analysis to obtain the following output: Required: a.What is the total fixed cost? b.What is the variable cost per employee? c.Prepare the linear cost function. d.What is the coefficient of determination? Comment on the goodness of fit.

A finance manager has to select one of the four different suppliers of raw materials. The total cost functions under the four options are given below. Assume the quality of the raw material to be the same, which of the following is preferred by the finance manager?

Which of the following statements is true of a linear cost function?

Goodness-of-fit measures how well the predicted values in a cost estimating equation ________.

Which of the following is a problem related to cost analysis?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

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