Question 1

Which of the following statements is NOT true?

Accepted Answer

A) In selecting an independent variable for cost behaviour analysis,it is important to determine the activity that causes the cost being analyzed to occur. 
B) Professional judgment is very important in selecting an activity measure for a particular cost. 
C) A low correlation between two variables proves that one causes the other. 
D) The least-squares cost estimation method can be used to measure the linear function. 
A) In selecting an independent variable for cost behaviour analysis,it is important to determine the activity that causes the cost being analyzed to occur. 
B) Professional judgment is very important in selecting an activity measure for a particular cost. 
C) A low correlation between two variables proves that one causes the other. 
D) The least-squares cost estimation method can be used to measure the linear function. C

Question 2

Given the following information:
$$\begin{array} { l c c c } 
\text { Month } & \text { HR Dept Costs } & \text { \# New Hires } & \text { \# Terminations } \
\text { January } & \$ 785,000 & 444 & 137 \
\text { February } & \$ 569,000 & 276 & 250 \
\text { March } & \$ 603,000 & 219 & 138 \
\text { April } & \$ 445,000 & 343 & 99 \
\text { May } & \$ 463,000 & 355 & 75 \
\text { June } & \$ 489,000 & 298 & 83 \
\text { July } & \$ 400,000 & 196 & 47 \
\text { August } & \$ 423,000 & 258 & 92 \
\text { September } & \$ 469,000 & 307 & 101 \
\text { October } & \$ 538,000 & 389 & 175 \
\text { November } & \$ 667,000 & 402 & 23 \
\text { December } & \$ 403,000 & 361 & 10
\end{array}$$   
a.Calculate an estimate of HR department costs using the high-low method using number of new hires as the variable parameter.
b.Calculate an estimate of HR department costs using the high-low method using number of terminations as the variable parameter.
c.Which parameter do you feel is a better driver of HR cost?

Accepted Answer

a.Variable using New Hires = ($785,000 - 400,000)/(444 - 196)= $1,552.42 
b.Variable using Terminations = ($785,000 - 400,000)/(137 - 47)= $4,277.78 a.Fixed using new hires = $785,000 - (444 * $1,552.42)= $95,725.52 
b.Fixed using terminations = $785,000 - (137 * $4,277.78)= $198,944.14 
c.There is no good way to determine which driver is a better predictor of HR costs in a given period.Using a regression analysis is the best way to determine if your parameters correlate to the prediction of overall cost.

Question 3

A manufacturing company pays an assembly line worker $10 per hour.What is the proper classification of this labour cost?

Accepted Answer

A) fixed cost 
B) semi-variable cost 
C) variable cost 
D) mixed cost 
A) fixed cost 
B) semi-variable cost 
C) variable cost 
D) mixed cost C

Question 4

Lee Corporation manufactures and sells party items. The following representative direct labour hours and production costs are provided for a four-month period:
$\begin{array}{ccc}
 \text { Month } & \text { Direct Labour Hours } & \text { Production } \
\hline \text { January } & 3,600 & \$ 15,000 \
 \text { February } & 4,800 & 17,500 \
 \text { March } & 6,000 & 20,000 \
 \text { April } & 4,800 & 17,500 \
\text { Total } & 19.200 & \$ 70.000 \

\end{array}$ Let $\quad $ a = Fixed production costs per month
 $\quad $ $\quad $b  = Variable production costs per direct labour hour
 $\quad $ $\quad $n = Number of months
 $\quad $ $\quad $X = Direct labour hours per month
 $\quad $ $\quad $Y = Total monthly production costs
 $\quad $ $\quad $s  = Summation
-Refer to the figure.Using the high-low method,what is the cost formula for estimating costs?

Accepted Answer

A) Total cost = $2.08X 
B) Total cost = $5,000 + 2.08X 
C) Total cost = $7,500 + $2.08X 
D) Total cost = $20,000 + $2.08X 
A) Total cost = $2.08X 
B) Total cost = $5,000 + 2.08X 
C) Total cost = $7,500 + $2.08X 
D) Total cost = $20,000 + $2.08X

Question 5

The following computer printout estimated overhead costs using multiple regression:
 
During the year the company used 1,000 setup hours and 500 parts.
-Refer to the figure.What model is being measured?

Accepted Answer

A) Overhead = 0.98 + 40.98(Setup hours)+ 4.865(# of parts) 
B) Overhead = 510 + 0.305(Setup hours)+ 10.527(# of parts) 
C) Overhead = 1,000 + 25(Setup hours) 
D) Overhead = 1,000 + 25(Setup hours)+ 100(# of parts) 
A) Overhead = 0.98 + 40.98(Setup hours)+ 4.865(# of parts) 
B) Overhead = 510 + 0.305(Setup hours)+ 10.527(# of parts) 
C) Overhead = 1,000 + 25(Setup hours) 
D) Overhead = 1,000 + 25(Setup hours)+ 100(# of parts)

Question 6

What are direct materials an example of?

Accepted Answer

A) fixed cost 
B) variable cost 
C) step cost 
D) mixed cost 
A) fixed cost 
B) variable cost 
C) step cost 
D) mixed cost

Question 7

Fixed cost per unit is $9 when 20,000 units are produced and $6 when 30,000 units are produced.What is the total fixed cost when nothing is produced?

Accepted Answer

A) $15 
B) $120,000 
C) $180,000 
D) $270,000 
A) $15 
B) $120,000 
C) $180,000 
D) $270,000

Question 8

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

Question 9

Holly Corporation has the following costs for 1,000 units: $$\begin{array} { l c c } 
& \text { Total Cost } & \text { Cost per Unit } \
\text { Direct materials } & 7,500 & 1.50 \
\text { Direct labour }  & 3,500 & 7.50\
\text { Depreciation an building }& 30,000 & 30.00  \

\end{array}$$ What is the total amount of direct materials for 100 units?

Accepted Answer

A) $1.50 
B) $3.00 
C) $150.00 
D) $225.00 
A) $1.50 
B) $3.00 
C) $150.00 
D) $225.00

Question 10

What does a coefficient of determination of 0.91 indicate?

Accepted Answer

A) Ninety-one percent of the variables move together in the same direction and have a strong relationship. 
B) The parameter is 91 percent significant. 
C) The model is significant 91 percent of the time. 
D) The independent variable explains 91 percent of the cost. 
A) Ninety-one percent of the variables move together in the same direction and have a strong relationship. 
B) The parameter is 91 percent significant. 
C) The model is significant 91 percent of the time. 
D) The independent variable explains 91 percent of the cost.

Question 11

The following computer printout estimated overhead costs using regression:
  $\begin{array}{|l|l|l|l|l|l|l|l|}
\hline\text { Degrees}&&&&\text { Degrees}\
\text {  of}&&&&\text {  of}\
\text { Freedom } & 90 \% & 95 \% & 99 \% & \text { Freedom } & 90 \% & 95 \% & 99 \%\
\hline 1 & 6.314 & 12.708 & 63.657 & 11 & 1.796 & 2.201 & 3.106 \
\hline 2 & 2.920 & 4.303 & 9.925 & 12 & 1.782 & 2.179 & 3.055 \
\hline 3 & 2.353 & 3.182 & 5.841 & 13 & 1.771 & 2.160 & 3.055 \
\hline 4 & 2.132 & 2.776 & 4.604 & 14 & 1.761 & 2.145 & 3.012 \
\hline 5 & 2.015 & 2.571 & 4.032 & 15 & 1.753 & 2.131 & 2.947 \
\hline 6 & 1.943 & 2.447 & 3.707 & 16 & 1.746 & 2.120 & 2.921 \
\hline 7 & 1.895 & 2.365 & 3.499 & 17 & 1.740 & 2.110 & 2.898 \
\hline 8 & 1.860 & 2.306 & 3.355 & 18 & 1.734 & 2.101 & 2.878 \
\hline 9 & 1.833 & 2.262 & 3.250 & 19 & 1.729 & 2.093 & 2.861 \
\hline 10 & 1.812 & 2.228 & 3.169 & 20 & 1.725 & 2.086 & 2.845 \
\hline
\end{array}$ During the last accounting period 10,000 DLH were worked.
-Refer to the figure.What does the coefficient of determination in this model indicate?

Accepted Answer

A) The slope is 14.05,which is the variable costs. 
B) The intercept is 100.41,which is the fixed costs. 
C) Eighty percent of the variation in overhead variable is explained by DLH. 
D) The slope is 14.05 and it is significant. 
A) The slope is 14.05,which is the variable costs. 
B) The intercept is 100.41,which is the fixed costs. 
C) Eighty percent of the variation in overhead variable is explained by DLH. 
D) The slope is 14.05 and it is significant.

Question 12

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis,which of the following costs would be represented by a line that starts at the origin and reaches a maximum value beyond which the line is parallel to the horizontal axis?

Accepted Answer

A) total direct material costs 
B) a consultant paid $100 per hour with a maximum fee of $2,000 
C) employees who are paid $15 per hour and guaranteed a minimum weekly wage of $300 
D) rent on exhibit space at a convention 
A) total direct material costs 
B) a consultant paid $100 per hour with a maximum fee of $2,000 
C) employees who are paid $15 per hour and guaranteed a minimum weekly wage of $300 
D) rent on exhibit space at a convention

Question 13

The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs: 
$\begin{array}{lr}
\text { Slope } & 45 \
\text { Intercept } & 5,700 \
\text { Correlation coefficient } & .72 \
\text { Activity variable } & \text { Direct labour hours }
\end{array}$ 
What is the cost formula?

Accepted Answer

A) Overhead = $5,700 - $45X 
B) Overhead = $5,700 + $45X 
C) Overhead = $5,700 + ($45 * 0.72) 
D) Overhead = $5,700 * 0.72 
A) Overhead = $5,700 - $45X 
B) Overhead = $5,700 + $45X 
C) Overhead = $5,700 + ($45 * 0.72) 
D) Overhead = $5,700 * 0.72

Question 14

What does a correlation coefficient near -1 mean?

Accepted Answer

A) Two variables are moving in the opposite direction. 
B) Two variables are moving in the same direction. 
C) Two variables are unrelated. 
D) One variable is not a good predictor of the other. 
A) Two variables are moving in the opposite direction. 
B) Two variables are moving in the same direction. 
C) Two variables are unrelated. 
D) One variable is not a good predictor of the other.

Question 15

If production volume increases from 8,000 to 10,000 units,how will the costs respond?

Accepted Answer

A) Total costs will increase by 20 percent. 
B) Total costs will increase by 25 percent. 
C) Total variable costs will increase by 25 percent. 
D) Mixed and variable costs will increase by 25 percent. 
A) Total costs will increase by 20 percent. 
B) Total costs will increase by 25 percent. 
C) Total variable costs will increase by 25 percent. 
D) Mixed and variable costs will increase by 25 percent.

Question 16

What is characteristic of committed resources?

Accepted Answer

A) They are supplied as needed. 
B) They are acquired from outside sources and do not require a long-term commitment. 
C) They may exceed the demand for their usage. 
D) They are free to purchase as much or as little as is needed. 
A) They are supplied as needed. 
B) They are acquired from outside sources and do not require a long-term commitment. 
C) They may exceed the demand for their usage. 
D) They are free to purchase as much or as little as is needed.

Question 17

What type of incurred cost provides long-term activity capacity,usually as the result of strategic planning?

Accepted Answer

A) discretionary fixed expenses 
B) committed fixed expenses 
C) mixed costs 
D) step-variable costs 
A) discretionary fixed expenses 
B) committed fixed expenses 
C) mixed costs 
D) step-variable costs

Question 18

The following computer printout estimated overhead costs using regression:   What is the 95 percent confidence interval around the slope estimate?

Accepted Answer

A) 9.57 to 18.54 
B) 9.64 to 18.46 
C) 10.67 to 17.45 
D) 11.98 to 16.13 
A) 9.57 to 18.54 
B) 9.64 to 18.46 
C) 10.67 to 17.45 
D) 11.98 to 16.13

Question 19

The following computer printout estimated overhead costs using regression:
  $\begin{array}{|l|l|l|l|l|l|l|l|}
\hline\text { Degrees}&&&&\text { Degrees}\
\text {  of}&&&&\text {  of}\
\text { Freedom } & 90 \% & 95 \% & 99 \% & \text { Freedom } & 90 \% & 95 \% & 99 \%\
\hline 1 & 6.314 & 12.708 & 63.657 & 11 & 1.796 & 2.201 & 3.106 \
\hline 2 & 2.920 & 4.303 & 9.925 & 12 & 1.782 & 2.179 & 3.055 \
\hline 3 & 2.353 & 3.182 & 5.841 & 13 & 1.771 & 2.160 & 3.055 \
\hline 4 & 2.132 & 2.776 & 4.604 & 14 & 1.761 & 2.145 & 3.012 \
\hline 5 & 2.015 & 2.571 & 4.032 & 15 & 1.753 & 2.131 & 2.947 \
\hline 6 & 1.943 & 2.447 & 3.707 & 16 & 1.746 & 2.120 & 2.921 \
\hline 7 & 1.895 & 2.365 & 3.499 & 17 & 1.740 & 2.110 & 2.898 \
\hline 8 & 1.860 & 2.306 & 3.355 & 18 & 1.734 & 2.101 & 2.878 \
\hline 9 & 1.833 & 2.262 & 3.250 & 19 & 1.729 & 2.093 & 2.861 \
\hline 10 & 1.812 & 2.228 & 3.169 & 20 & 1.725 & 2.086 & 2.845 \
\hline
\end{array}$ During the last accounting period 10,000 DLH were worked.
-Refer to the figure.What is the model?

Accepted Answer

A) Overhead = 100.41 + 14.05 DLH 
B) Overhead = 4.81 + 6.78 DLH 
C) Overhead = 14.05 + 100.41 DLH 
D) DLH = 4.81 + 6.78 Overhead 
A) Overhead = 100.41 + 14.05 DLH 
B) Overhead = 4.81 + 6.78 DLH 
C) Overhead = 14.05 + 100.41 DLH 
D) DLH = 4.81 + 6.78 Overhead

Question 20

When a firm acquires the resources needed to perform an activity,what is it obtaining?

Accepted Answer

A) practical capacity 
B) resource usage 
C) activity capacity 
D) unused capacity 
A) practical capacity 
B) resource usage 
C) activity capacity 
D) unused capacity

Which of the following statements is NOT true?

A manufacturing company pays an assembly line worker $10 per hour.What is the proper classification of this labour cost?

The following computer printout estimated overhead costs using multiple regression: During the year the company used 1,000 setup hours and 500 parts. -Refer to the figure.What model is being measured?

What are direct materials an example of?

Fixed cost per unit is $9 when 20,000 units are produced and $6 when 30,000 units are produced.What is the total fixed cost when nothing is produced?

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

Holly Corporation has the following costs for 1,000 units: Total Cost Cost per Unit Direct materials 7,500 1.50 Direct labour 3,500 7.50 Depreciation an building 30,000 30.00 What is the total amount of direct materials for 100 units?

What does a coefficient of determination of 0.91 indicate?

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis,which of the following costs would be represented by a line that starts at the origin and reaches a maximum value beyond which the line is parallel to the horizontal axis?

The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs: Slope 45 Intercept 5,700 Correlation coefficient .72 Activity variable Direct labour hours What is the cost formula?

What does a correlation coefficient near -1 mean?

If production volume increases from 8,000 to 10,000 units,how will the costs respond?

What is characteristic of committed resources?

What type of incurred cost provides long-term activity capacity,usually as the result of strategic planning?

The following computer printout estimated overhead costs using regression: What is the 95 percent confidence interval around the slope estimate?

When a firm acquires the resources needed to perform an activity,what is it obtaining?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

Filters

Exam 2: Cost Behaviour

Which of the following statements is NOT true?

A manufacturing company pays an assembly line worker $10 per hour.What is the proper classification of this labour cost?

The following computer printout estimated overhead costs using multiple regression: During the year the company used 1,000 setup hours and 500 parts. -Refer to the figure.What model is being measured?

What are direct materials an example of?

Fixed cost per unit is $9 when 20,000 units are produced and $6 when 30,000 units are produced.What is the total fixed cost when nothing is produced?

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

Holly Corporation has the following costs for 1,000 units: Total Cost Cost per Unit Direct materials 7,500 1.50 Direct labour 3,500 7.50 Depreciation an building 30,000 30.00 What is the total amount of direct materials for 100 units?

What does a coefficient of determination of 0.91 indicate?

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis,which of the following costs would be represented by a line that starts at the origin and reaches a maximum value beyond which the line is parallel to the horizontal axis?

The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs: Slope 45 Intercept 5,700 Correlation coefficient .72 Activity variable Direct labour hours What is the cost formula?

What does a correlation coefficient near -1 mean?

If production volume increases from 8,000 to 10,000 units,how will the costs respond?

What is characteristic of committed resources?

What type of incurred cost provides long-term activity capacity,usually as the result of strategic planning?

The following computer printout estimated overhead costs using regression: What is the 95 percent confidence interval around the slope estimate?

When a firm acquires the resources needed to perform an activity,what is it obtaining?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

Filters