Exam 2: Cost Concepts, Behaviour and Estimation

Liva Company wants to develop a cost function for its maintenance costs to estimate such costs for the coming year. The following data are available:

Changes in cost behavior over time are one source of uncertainty in estimating future costs.

Managers go through a series of questions to decide whether to use past costs to estimate future costs. Which of the following questions is least likely to be one of them?

A scatter plot is especially useful when managers wish to

Managers analyse production activities and assign costs based on the estimated amount of resources used when they use this method.

A disadvantage of regression analysis as a method of determining a cost function is

Estimates of future costs can be used in budgeting.

A learning curve is the rate at which

Three different divisions of a toy manufacturing company are estimating costs for their human resources departments. Each division has a cost structure that is different from the other divisions' and those structures are represented by the following cost behavior patterns. Which cost is best described as mixed?

Preparing a scatter plot is a requirement before applying the two-point method of cost estimation.

Regression analysis usually provides a higher quality cost function than the high-low method.

Regression analysis is classified as simple or multiple depending upon the number of dependent variables to be estimated.

Regression analysis works best when the relationship between costs and cost drivers is

Which of the following is not an assumption of linear regression analysis

Janice's Kennel and Pet Spa is located in Sydney. The company employs three pet attendants, four pet groomers and two front office staff who book appointments and keep records. The spa provides a range of services for dogs and cats including boarding, grooming, and obedience training. The grooming area includes a small retail section that carries dog and cat food, pet supplies, and toys. Janice's relevant range of activity would best be measured in terms of:

The relevant range is defined as

If the organisation has only operated for a short time several methods of determining the cost function cannot be used.

In a regression equation, variable costs per unit are represented by the

Reviewing the pattern of a cost over time is a critical step in determining an engineered cost estimate.

Past cost information, although accurate in predicting future costs, may be I Unavailable II Irrelevant III Outdated