Question 1

An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.

Accepted Answer

A) True 
 B)False

Question 2

High Tech Manufacturing Inc., incurred total indirect manufacturing labor costs of $550,000. The company is labor intensive. Total labor hours during the period were 4,400. Using qualitative analysis, the manager and the management accountant determine that over the period the indirect manufacturing labor costs are mixed costs with only one cost driver-labor-hours. They separated the total indirect manufacturing labor costs into costs that are fixed ($120,000 based on 8,700 hours of labor) and costs that are variable ($430,000) based on the number of labor-hours used. The company has estimated 6,900 labor hours during the next period.
What will be the total variable cost for the estimated 6,900 hours? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A)  $341,034 
B)  $674,337 
C)  $862,500 
D)  $436,207 
A)  $341,034 
B)  $674,337 
C)  $862,500 
D)  $436,207

Question 3

The cost function y = 300 + 2X ________.

Accepted Answer

A)  has a slope coefficient of 300 
B)  has an intercept of 300 
C)  is a nonlinear 
D)  represents a fixed cost 
A)  has a slope coefficient of 300 
B)  has an intercept of 300 
C)  is a nonlinear 
D)  represents a fixed cost

Question 4

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

Accepted Answer

A) True 
 B)False

Question 5

When estimating a cost function, cost behavior can be approximated by a linear cost function within the relevant range.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a nonlinear cost function?

Accepted Answer

A)  increase of $20,000 revenues with increase in sales in units 
B)  total fixed cost of $25,000 
C)  variable cost of $5 per unit 
D)  a step cost function 
A)  increase of $20,000 revenues with increase in sales in units 
B)  total fixed cost of $25,000 
C)  variable cost of $5 per unit 
D)  a step cost function

Question 7

Grandy's Beer was to manufacture 600 cases of ale next week. The accountant provided the following analysis of total manufacturing costs.
 
What is the estimated cost of producing the 600 cases of ale?

Accepted Answer

A)  $147,150 
B)  $90,245 
C)  $61,950 
D)  $49,434 
A)  $147,150 
B)  $90,245 
C)  $61,950 
D)  $49,434

Question 8

Harold's Picture manufactures various picture frames. Each new employee takes 6 hours to make the first picture frame and 4.8 hours to make the second. The manufacturing overhead charge per hour is $25.
Required:
a.What is the learning-curve percentage, assuming the cumulative average method?
b.What is the time needed to build 8 picture frames by a new employee using the cumulative average-time method? You may use an index of ?0.1520.
c.What is the time needed to produce the 16th frame by a new employee using the incremental unit-time method? You may use an index of ?0.3219.
d.How much manufacturing overhead would be charged to the 16 picture frames using the average-time approach?

Accepted Answer

The answer of Harold's Picture manufactures various picture frames. Each...

Question 9

An experience curve is a function that measures the decline in cost per unit in various business functions of the value chain as the amount of these activities increases.

Accepted Answer

A) True 
 B)False

Question 10

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:
 
What is the estimated cost function for the above data?

Accepted Answer

A)  y = 26,000 + 62.00X 
B)  y = 6,000 + 50.00X 
C)  y = 36,000 + 60.00X 
D)  y = 30,000 + 65.00X 
A)  y = 26,000 + 62.00X 
B)  y = 6,000 + 50.00X 
C)  y = 36,000 + 60.00X 
D)  y = 30,000 + 65.00X

Question 11

The advantages of the high-low method to estimate a cost function is that it is easy and accurate.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of nonlinear cost function?

Accepted Answer

A)  variable-cost functions 
B)  fixed-cost functions 
C)  learning curves 
D)  mixed cost functions 
A)  variable-cost functions 
B)  fixed-cost functions 
C)  learning curves 
D)  mixed cost functions

Question 13

If machine maintenance is scheduled at a time when production is at a low level, then ________.

Accepted Answer

A)  low production is the cost driver of high repair costs 
B)  an understanding of operations is needed to determine an appropriate cost driver 
C)  low production should be avoided since it is the cause of machine maintenance 
D)  machine maintenance cannot be accurately predicted 
A)  low production is the cost driver of high repair costs 
B)  an understanding of operations is needed to determine an appropriate cost driver 
C)  low production should be avoided since it is the cause of machine maintenance 
D)  machine maintenance cannot be accurately predicted

Question 14

High Tech Manufacturing Inc., incurred total indirect manufacturing labor costs of $480,000. The company is labor intensive. Total labor hours during the period were 4,400. Using qualitative analysis, the manager and the management accountant determine that over the period the indirect manufacturing labor costs are mixed costs with only one cost driver-labor-hours. They separated the total indirect manufacturing labor costs into costs that are fixed ($130,000 based on 8,100 hours of labor) and costs that are variable   based on the number of labor-hours used. The company has estimated 7,700 labor hours during the next period.
What will be the total cost for the estimated 7,700 hours? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A)  $462,716 
B)  $586,296 
C)  $840,000 
D)  $742,535 
A)  $462,716 
B)  $586,296 
C)  $840,000 
D)  $742,535

Question 15

Which of the following is a step to overcome problems related to data collection for estimating cost function?

Accepted Answer

A)  The analyst should remove the inflationary effects. 
B)  The analyst should consider fixed costs as variable. 
C)  The analyst should also use extreme values while calculating cost functions. 
D)  The analyst should not use accrual accounting. 
A)  The analyst should remove the inflationary effects. 
B)  The analyst should consider fixed costs as variable. 
C)  The analyst should also use extreme values while calculating cost functions. 
D)  The analyst should not use accrual accounting.

Question 16

Dandy Manufacturing Company uses two different independent variables (machine-hours and number of packages) in two different equations to evaluate costs of the packaging department. The most recent results of the two regressions are as follows:
   
Required:
a.What are the estimating equations for each cost driver?
b.Which cost driver is best and why?

Accepted Answer

a.Machine-hoursy = $748.30 + $52.90X
Num

Question 17

An "economy of scale" function is an example of a linear cost function.

Accepted Answer

A) True 
 B)False

Question 18

A cost driver should be measurable and have an economically plausible relationship with the dependent variable which means:

Accepted Answer

A)  that the cost driver can be identified in an economically feasible way 
B)  that the relationship is based on correlation 
C)  that the relationship is based on a cause -and-effect criterion and makes economic sense to management 
D)  that the relationship must be based on a physical relationship 
A)  that the cost driver can be identified in an economically feasible way 
B)  that the relationship is based on correlation 
C)  that the relationship is based on a cause -and-effect criterion and makes economic sense to management 
D)  that the relationship must be based on a physical relationship

Question 19

The account analysis method of cost estimation classifies account costs as fixed, mixed, or variable using qualitative judgments.

Accepted Answer

A) True 
 B)False

Question 20

Jake's Copy Center hires a new employee. Jake knows he has to be patient with the employee until the employee gains enough experience to meet production standards. Jake is unsure of the learning curve in his operation, but he knows the first job by a new employee averages 50 minutes and the second job averages 40 minutes. Assume all jobs to be equal in size.
Required:
a.What is the learning-curve percentage, assuming the cumulative average-time method?
b.What is the time for a new employee to do 32 jobs with this learning curve using the cumulative average-time method? You may use an index of ?0.1520.

Accepted Answer

The answer of Jake's Copy Center hires a new employee....

An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.

The cost function y = 300 + 2X ________.

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

When estimating a cost function, cost behavior can be approximated by a linear cost function within the relevant range.

Which of the following is not a nonlinear cost function?

Grandy's Beer was to manufacture 600 cases of ale next week. The accountant provided the following analysis of total manufacturing costs. What is the estimated cost of producing the 600 cases of ale?

An experience curve is a function that measures the decline in cost per unit in various business functions of the value chain as the amount of these activities increases.

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the estimated cost function for the above data?

The advantages of the high-low method to estimate a cost function is that it is easy and accurate.

Which of the following is an example of nonlinear cost function?

If machine maintenance is scheduled at a time when production is at a low level, then ________.

Which of the following is a step to overcome problems related to data collection for estimating cost function?

An "economy of scale" function is an example of a linear cost function.

A cost driver should be measurable and have an economically plausible relationship with the dependent variable which means:

The account analysis method of cost estimation classifies account costs as fixed, mixed, or variable using qualitative judgments.

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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Exam 10: Determining How Costs Behave

An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.

The cost function y = 300 + 2X ________.

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

When estimating a cost function, cost behavior can be approximated by a linear cost function within the relevant range.

Which of the following is not a nonlinear cost function?

Grandy's Beer was to manufacture 600 cases of ale next week. The accountant provided the following analysis of total manufacturing costs. What is the estimated cost of producing the 600 cases of ale?

An experience curve is a function that measures the decline in cost per unit in various business functions of the value chain as the amount of these activities increases.

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the estimated cost function for the above data?

The advantages of the high-low method to estimate a cost function is that it is easy and accurate.

Which of the following is an example of nonlinear cost function?

If machine maintenance is scheduled at a time when production is at a low level, then ________.

Which of the following is a step to overcome problems related to data collection for estimating cost function?

An "economy of scale" function is an example of a linear cost function.

A cost driver should be measurable and have an economically plausible relationship with the dependent variable which means:

The account analysis method of cost estimation classifies account costs as fixed, mixed, or variable using qualitative judgments.

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

Filters