Exam 3: Measurement of Cost Behavior

________ is a method in which the cost analyst draws a straight line through a plot of all the available data,and develops the cost function from this line.

A measure of how much of the fluctuation of a cost is explained by changes in the cost driver is ________.

A concern with using historical data to measure cost behavior is the possibility that historical data may hide past inefficiencies that the company could reduce if it could identify them.

Merkey Motel's cost function is given as: Y = $50,000 + $7.50X Where: Y = annual custodial cost X = number of guest-days of occupancy In the current year,Merkey Motel has 8,000 guest days.In the next year,Merkey Motel expects an occupancy level of 10,000 guest days.(All costs next year will remain in the same relevant range as the current year.)What is the expected fixed custodial cost for next year?

If regression analysis is used when measuring cost behavior,plotting the cost against each of the potential cost drivers is not necessary.

________ uses statistics to fit a cost function to all the historical data.

Which statement is FALSE regarding the high-low method to approximate a linear cost function?

In regression analysis,a lower coefficient of determination is better than a higher one.

Knowledge about the relationship between costs and cost drivers helps managers ________.

The Rock Company used regression analysis to predict the annual cost of utilities.The results were as follows: The variable cost per direct labor hour is ________.

The Milwaukee Recreation Center is planning its annual fundraiser.The event committee has developed the following budget for the event. The committee expects 3,000 people will attend the event. Required: A)Compute the fixed and variable costs for the event. B)If Milwaukee Recreation charges $100 per person,how much money will be raised by this event?

Discretionary fixed costs have direct relationships with levels of capacity or output activity.

In a linear cost function,the cost to be explained is the independent variable.

Committed fixed costs can be altered by management if management decides that different levels of spending are desirable.

When performing an engineering analysis,one must consider that the observed time period may be abnormal.

XXX Company manufactures cardboard boxes.The company is considering three cost drivers for measuring support costs in the factory.The following cost functions have been estimated using each cost driver: Required: A)Which cost driver should be chosen? Why?

Identify the following planned costs as: (A)purely variable costs (B)discretionary fixed costs (C)committed fixed costs (D)mixed costs (E)step costs ________ 1.Mortgage payment on factory building. ________ 2.Electricity used in operating equipment.The utility company charges a base rate of $100 per month plus $0.10 per hour. ________ 3.A lump sum amount of advertising costs planned by a local restaurant. ________ 4.Nursing supervisors' salaries (a supervisor is needed for every 10 nurses). ________ 5.Training costs for employees. ________ 6.Crew supervisor in small construction company.A new supervisor is needed for every 12 workers employed. ________ 7.Sales commissions based on amount of sales. ________ 8.Rental payment on a 30-year lease for office space in a private office building. ________ 9.Public relations department at a large consumer-oriented company. ________ 10.Management consulting services acquired to resolve company image Problems. ________ 11.Insurance on factory machines. ________ 12.Salaries of Chief Financial Officer and Chief Executive Officer.

The following three data points are available.This is an example of a ________ cost.

The fixed costs required to achieve a desired level of production or to provide a desired level of service,while maintaining product or service attributes,are ________.

The following data has been assembled for Tiger Company.Use the high-low method. The cost function is ________ where Y = Total cost and X = Number of hours.