Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Harry's Picture manufactures various picture frames. Each new employee takes 5 hours to make the first picture frame and 4 hours to make the second. The manufacturing overhead charge per hour is $20.
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

@#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& d. T

Question 3

A steeply sloped regression line indicates:

Accepted Answer

A) a strong relationship between the cost driver and costs 
B) a greater proportion of fixed costs than variable costs 
C) an economically plausible relationship exists 
D) management should cut costs 
A) a strong relationship between the cost driver and costs 
B) a greater proportion of fixed costs than variable costs 
C) an economically plausible relationship exists 
D) management should cut costs

Question 4

The larger the vertical difference between actual costs and predicted costs the better the goodness of fit.

Accepted Answer

A) True 
 B)False

Question 5

If inaccurate cost estimates are too low, then a company may unknowingly reward a manager for poor performance.

Accepted Answer

A) True 
 B)False

Question 6

Fixed costs are sometimes allocated to individual products as part of the standard costing system. When this is the case, they should be treated as variable costs for purposes of future cost estimation.

Accepted Answer

A) True 
 B)False

Question 7

Answer the following questions using the information below:
The Gangwere Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Gangwere Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
  
-How is the cost function stated?

Accepted Answer

A) y = $26,672 + $1.84X 
B) y = $21,360 + $10.40 
C) y = $10,112 + $8.64X 
D) y = $3,600 + $10.40X 
A) y = $26,672 + $1.84X 
B) y = $21,360 + $10.40 
C) y = $10,112 + $8.64X 
D) y = $3,600 + $10.40X

Question 8

Joe's Copy Center hires a new employee. Joe knows he has to be patient with the employee until the employee gains enough experience to meet production standards. Joe is unsure of the learning curve in his operation, but he knows the first job by a new employee averages 40 minutes and the second job averages 32 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 Joe's Copy Center hires a new employee....

Question 9

The incremental unit-time learning model with a 90% learning curve indicates that if it takes 100 minutes to manufacture the first unit of a new model, then the second unit will take only 90 minutes to manufacture.

Accepted Answer

A) True 
 B)False

Question 10

Put the following steps in order for using the high-low method of estimating a cost function:

Accepted Answer

A) D C A B 
B) C D A B 
C) A D C B 
D) D C B A 
A) D C A B 
B) C D A B 
C) A D C B 
D) D C B A

Question 11

An inaccurate cost function with a constant that is estimated too high may most likely result in:

Accepted Answer

A) evaluating a weak manager as providing strong performance 
B) promoting a product that is actually less profitable than budgeted 
C) predicting total costs that are too low 
D) replicating processes that are truly cost saving 
A) evaluating a weak manager as providing strong performance 
B) promoting a product that is actually less profitable than budgeted 
C) predicting total costs that are too low 
D) replicating processes that are truly cost saving

Question 12

A step fixed-cost function:

Accepted Answer

A) is fixed over the short run but not over the long run 
B) is often approximated with a continuous variable-cost function 
C) remains the same over a narrow range of activity 
D) example includes setup costs 
A) is fixed over the short run but not over the long run 
B) is often approximated with a continuous variable-cost function 
C) remains the same over a narrow range of activity 
D) example includes setup costs

Question 13

Answer the following questions using the information below:
Presented below are the production data for the first six months of the year for the mixed costs incurred by Gallup Company.
   Gallup Company uses the high-low method to analyze mixed costs.
-How would the cost function be stated?

Accepted Answer

A) y = $440 + $1.12X 
B) y = $3,562.30 + $0.144X 
C) y = $107.20 + $1.12 
D) y = $7,850 + $0.132X 
A) y = $440 + $1.12X 
B) y = $3,562.30 + $0.144X 
C) y = $107.20 + $1.12 
D) y = $7,850 + $0.132X

Question 14

The cost function y = 150 + 10X:

Accepted Answer

A) has a slope coefficient of 150 
B) has an intercept of 150 
C) is a nonlinear 
D) represents a fixed cost 
A) has a slope coefficient of 150 
B) has an intercept of 150 
C) is a nonlinear 
D) represents a fixed cost

Question 15

Answer the following questions using the information below:
At the Christopher 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.
    
-If the number of employees is considered the cost driver, what amount of library and information center costs will be allocated to Department A?

Accepted Answer

A) $100,000 
B) $25,000 
C) $0 
D) $112,500 
A) $100,000 
B) $25,000 
C) $0 
D) $112,500

Question 16

The smaller the residual term the:

Accepted Answer

A) stronger the relationship between the cost driver and costs 
B) weaker the relationship between the cost driver and costs 
C) steeper the slope of the cost function 
D) gentler the slope of the cost function 
A) stronger the relationship between the cost driver and costs 
B) weaker the relationship between the cost driver and costs 
C) steeper the slope of the cost function 
D) gentler the slope of the cost function

Question 17

Multicollinearity is a concern in multiple regression but NOT a concern in simple regression.

Accepted Answer

A) True 
 B)False

Question 18

Answer the following questions using the information below:
Jerry's TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations.
  
-What are the estimated total costs if Penny's expects to sell 3,000 units next year?

Accepted Answer

A) $1,550,000 
B) $1,332,000 
C) $1,671,000 
D) $1,453,000 
A) $1,550,000 
B) $1,332,000 
C) $1,671,000 
D) $1,453,000

Question 19

A step cost function is an example of a linear cost function.

Accepted Answer

A) True 
 B)False

Question 20

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

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

A steeply sloped regression line indicates:

The larger the vertical difference between actual costs and predicted costs the better the goodness of fit.

If inaccurate cost estimates are too low, then a company may unknowingly reward a manager for poor performance.

Fixed costs are sometimes allocated to individual products as part of the standard costing system. When this is the case, they should be treated as variable costs for purposes of future cost estimation.

The incremental unit-time learning model with a 90% learning curve indicates that if it takes 100 minutes to manufacture the first unit of a new model, then the second unit will take only 90 minutes to manufacture.

Put the following steps in order for using the high-low method of estimating a cost function:

An inaccurate cost function with a constant that is estimated too high may most likely result in:

A step fixed-cost function:

Answer the following questions using the information below: Presented below are the production data for the first six months of the year for the mixed costs incurred by Gallup Company. Gallup Company uses the high-low method to analyze mixed costs. -How would the cost function be stated?

The cost function y = 150 + 10X:

The smaller the residual term the:

Multicollinearity is a concern in multiple regression but NOT a concern in simple regression.

A step cost function is an example of a linear cost function.

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.

The Accountants Role in the Organization

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

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

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, Time, and the Theory of Constraints

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

Exam 10: Determining How Costs Behave

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

A steeply sloped regression line indicates:

The larger the vertical difference between actual costs and predicted costs the better the goodness of fit.

If inaccurate cost estimates are too low, then a company may unknowingly reward a manager for poor performance.

Fixed costs are sometimes allocated to individual products as part of the standard costing system. When this is the case, they should be treated as variable costs for purposes of future cost estimation.

The incremental unit-time learning model with a 90% learning curve indicates that if it takes 100 minutes to manufacture the first unit of a new model, then the second unit will take only 90 minutes to manufacture.

Put the following steps in order for using the high-low method of estimating a cost function:

An inaccurate cost function with a constant that is estimated too high may most likely result in:

A step fixed-cost function:

Answer the following questions using the information below: Presented below are the production data for the first six months of the year for the mixed costs incurred by Gallup Company. Gallup Company uses the high-low method to analyze mixed costs. -How would the cost function be stated?

The cost function y = 150 + 10X:

The smaller the residual term the:

Multicollinearity is a concern in multiple regression but NOT a concern in simple regression.

A step cost function is an example of a linear cost function.

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.

The Accountants Role in the Organization

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

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

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, Time, and the Theory of Constraints

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