Question 1

Which of the following is not an issue in the collection of data for cost estimation?

Accepted Answer

A) Outliers. 
B) Missing data. 
C) Mismatched time periods. 
D) Inflation. 
E) The use of predictions using the multiple regression method. 
A) Outliers. 
B) Missing data. 
C) Mismatched time periods. 
D) Inflation. 
E) The use of predictions using the multiple regression method.

Question 2

What type of cost exhibits the behaviour that follows? $\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Manufacturing } \
\text { Volume } \
\text { (Units) }
\end{array} & \begin{array} { l } 
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Cost } \
\text { Per Unit }
\end{array} \
\hline 50.000 &\$150,000 & \$ 3.00\
\hline 80.000 & 150,000 & 1.88 \
\hline
\end{array}$

Accepted Answer

A) Variable cost. 
B) Fixed cost. 
C) Curvilinear cost. 
D) Step-variable cost. 
E) Mixed cost. 
A) Variable cost. 
B) Fixed cost. 
C) Curvilinear cost. 
D) Step-variable cost. 
E) Mixed cost.

Question 3

Song Inc., uses the high-low method to analyze cost behaviour. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which is still within the relevant range, the total maintenance costs averaged $30.40 per machine hour. On the basis of this information, the variable cost per machine hour is:

Accepted Answer

A) $8.40. 
B) $22.00. 
C) $25.00. 
D) $30.40. 
E) $33.40. 
A) $8.40. 
B) $22.00. 
C) $25.00. 
D) $30.40. 
E) $33.40.

Question 4

Which of the following methods of cost estimation relies on only two data points?

Accepted Answer

A) The least-squares regression. 
B) The high-low method. 
C) The visual-fit method. 
D) The account analysis. 
E) The multiple regression. 
A) The least-squares regression. 
B) The high-low method. 
C) The visual-fit method. 
D) The account analysis. 
E) The multiple regression.

Question 5

Northridge Inc., uses the high-low method to analyze cost behaviour. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged $10.50 per hour. When activity jumped to 24,000 machine hours, which is still within the relevant range, the total maintenance costs averaged $9.75 per machine hour. On the basis of this information, the company's fixed maintenance costs are:

Accepted Answer

A) $20,000. 
B) $24,000. 
C) $90,000. 
D) $210,000. 
E) $234,000. 
A) $20,000. 
B) $24,000. 
C) $90,000. 
D) $210,000. 
E) $234,000.

Question 6

Checkers Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?

Accepted Answer

A) Total manufacturing overhead is represented by the variable "X." 
B) "Y" is commonly known as the independent variable. 
C) "X" is commonly known as the dependent variable. 
D) "X" represents total manufacturing overhead. 
E) The company anticipates $495,000 of fixed manufacturing overhead. 
A) Total manufacturing overhead is represented by the variable "X." 
B) "Y" is commonly known as the independent variable. 
C) "X" is commonly known as the dependent variable. 
D) "X" represents total manufacturing overhead. 
E) The company anticipates $495,000 of fixed manufacturing overhead.

Question 7

(p. 218 and 223.)
Shortly after being hired as an analyst with Hudson Rentals, which is located in eastern Quebec, Luis Gomez was asked to prepare a report that focused on the company's order processing costs-a cost driven largely by the number of rental invoices written. Luis knew that he could use several different tools to analyze cost behaviour, including scatter diagrams, least-squares regression, and the high-low method. In addition, he knew that he could present the results of his analysis in the form of algebraic equations. Those equations follow.
Scatter diagram: OP = $56,000 + $6.80RI
Least-squares regression: OP = $59,000 + $6.75RI
High-low method: OP = $53,500 + $7.25RI
where: OP = total order processing costs and RI = number of rental invoices written
Luis had analyzed data over the past 12 months and built equations based on these data, purposely including the slowest month of the year and the busiest month so that things would "tend to even out." He observed that February was especially slow because of a paralyzing blizzard across the entire province, one that forced the company to close for four days.
Required:
A. Will scatter diagrams, least-squares regression, and the high-low method normally result in the same equation? Why?
B. Assuming the use of least-squares regression, explain what the $59,000 and $6.75 figures represent.
C. Assuming the use of a scatter diagram, predict the order processing cost of an upcoming month when Hudson expects to write 2,500 rental invoices.
D. Did Luiserr in constructing the equations on data of the past 12 months? Briefly discuss. If "yes," determine which of the three tools is likely to be affected the most and explain why.

Accepted Answer

A. No. The three methods produce equatio

Question 8

Which type of fixed cost (1) tends to be more long-term in nature and (2) can be cut back more easily in bad economic times without doing serious harm to organizational goals and objectives? $\begin{array} { | l | c | c | } 
\hline & \text { Long Term in } & \text { Can be Cut Back More Easily In } \
&\text { Nature }&\text { Bad Ficonomic Times }\

\hline 1 & \text { Committed } & \text { Committed } \
\hline 2 & \text { Committed } & \text { Discretionary } \
\hline 3 & \text { Discretionary } & \text { Committed } \
\hline 4 & \text { Discretionary } & \text { Discretionary } \
\hline 5 & \text { Committed } & \text { No difference between committed and discretionary cost } \
\hline
\end{array}$

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 9

Which of the following would not typically be classified as a discretionary cost?

Accepted Answer

A) Equipment depreciation. 
B) Management development programs. 
C) Advertising and promotion. 
D) Research and development costs. 
E) Contributions to charitable organizations. 
A) Equipment depreciation. 
B) Management development programs. 
C) Advertising and promotion. 
D) Research and development costs. 
E) Contributions to charitable organizations.

Question 10

Hebert Corporation extracts ore for eight different companies in Quebec. The firm anticipates variable costs of $65 per ton along with annual fixed overhead of $840,000, which is incurred evenly throughout the year. These costs exclude the following semi-variable costs, which are expected to total the amounts shown for the high and low points of ore extraction activity:
March (850 tons): $39,900.
August (1,300 tons): $46,200
Hebert uses the high-low method to analyze cost behaviour.
Required:
A. Calculate the semi-variable cost for an upcoming month when 875 tons will be extracted.
B. Calculate the total cost for that same month.
C. Hebert uses Charron Trucking Limited to haul extracted ore. Charron's monthly charges are as follows. $\begin{array} { l r } 
800 - 1,099 \text { tons } & \$ 70,000 \
1,100 \text { tons } - 1,399 \text { tons } & 90,000 \
1,400 + \text { tons } & 110,000
\end{array}$ 1. From a cost behaviour perspective, what type of cost is this?
If Hebert plans to extract 875 tons, is the company being very "cost effective" with respect to Charron's billing rates? Briefly discuss.

Accepted Answer

A. Analysis of semi-variable cost (varia

Question 11

The high-low method and the least-squares regression method are used by accountants to:

Accepted Answer

A) evaluate divisional managers for purposes of promotions. 
B) choose among alternative courses of action. 
C) maximize output. 
D) estimate costs. 
E) control operations. 
A) evaluate divisional managers for purposes of promotions. 
B) choose among alternative courses of action. 
C) maximize output. 
D) estimate costs. 
E) control operations.

Which of the following is not an issue in the collection of data for cost estimation?

What type of cost exhibits the behaviour that follows? Manufacturing Volume (Units) Total Cost Cost Per Unit 50.000 \1 50,000 \ 3.00 80.000 150,000 1.88

Which of the following methods of cost estimation relies on only two data points?

Checkers Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?

Which of the following would not typically be classified as a discretionary cost?

The high-low method and the least-squares regression method are used by accountants to:

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters

Exam 6: Activity Analysis, Cost Behaviour, and Cost Estimation

Which of the following is not an issue in the collection of data for cost estimation?

What type of cost exhibits the behaviour that follows? Manufacturing Volume (Units) Total Cost Cost Per Unit 50.000 \1 50,000 \ 3.00 80.000 150,000 1.88

Which of the following methods of cost estimation relies on only two data points?

Checkers Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?

Which of the following would not typically be classified as a discretionary cost?

The high-low method and the least-squares regression method are used by accountants to:

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Cost Management Tools

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters