Question 1

The cost function y = 80 + 4X:

Accepted Answer

A) has a slope coefficient of 4. 
B) has a slope coefficient of -4. 
C) will intersect the y-axis at 4. 
D) is a curved line. 
A) has a slope coefficient of 4. 
B) has a slope coefficient of -4. 
C) will intersect the y-axis at 4. 
D) is a curved line.

Question 2

The smaller the residual term,the:

Accepted Answer

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

Question 3

Economic plausibility is an important criterion for choosing a cost driver.

Accepted Answer

A) True 
 B)False

Question 4

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

Accepted Answer

A) True 
 B)False

Question 5

The most common forms of quantitative analysis are the 'conference method' and the 'account analysis method'.

Accepted Answer

A) True 
 B)False

Question 6

Answer the following questions using the information below:
At the Gregan Company,the cost of the personnel department has always been charged to production departments based upon number of employees.Recently,opinions gathered from the department managers indicate that the number of new hires might be a better predictor of personnel costs.
Total personnel department costs are $320 000.
 $$\begin{array} { l r r r } 
\text { Department } & \underline { \mathbf { A } } & \underline { \mathbf { B } } & \underline { \mathrm { C } } \
\text { Number of employees } & 30 & 270 & 100 \
\text { The number of new hires } & 8 & 12 & 5
\end{array}$$
-If the number of employees is considered the cost driver,what amount of personnel costs will be allocated to Department A?

Accepted Answer

A) $24 000 
B) $102 400 
C) $40 000 
D) $10 666 
A) $24 000 
B) $102 400 
C) $40 000 
D) $10 666

Question 7

Akama Allambee,controller,gathered data on overhead costs and direct labour-hours over the past 12 months.List and discuss the different approaches Akama can use to estimate a cost function for overhead costs using direct labour-hours as the cost driver.
_____________________________________________________________________________________________
____________________________________________________________________________________________

Accepted Answer

The four approaches to cost estimation a

Question 8

Answer the following questions using the information below:
Hewitt Sporting Goods Store is a small company that has hired you to perform some management advisory services.The following information pertains to 2018 operations.
 $\begin{array}{lr}
\text { Sales (2000 cricket bats) } & \$ 900000 \
\text { Cost of goods sold } & 400000 \
\text { Store manager's salary per year } & 70000 \
\text { Operating costs per year } & 157000 \
\text { Advertising and promotion per year } & 15000 \
\text { Commissions ( } 4 \% \text { of sales) } & 36000
\end{array}$
-What are the estimated total costs if Hewitt expects to sell 3000 units next year?

Accepted Answer

A) $896 000 
B) $1 017 000 
C) $678 000 
D) $799 000 
A) $896 000 
B) $1 017 000 
C) $678 000 
D) $799 000

Question 9

Accurate cost estimation is useful both in understanding past cost relationships and as a means of predicting costs.

Accepted Answer

A) True 
 B)False

Question 10

What are the two assumptions behind a simple linear cost function? Briefly explain the three ways that a linear cost function may behave.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The two usual assumptions behind a simpl

Question 11

Misinterpretation of data can arise when fixed costs are reported on a per unit basis.

Accepted Answer

A) True 
 B)False

Question 12

Answer the following questions using the information below:
The Nowra Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable.Nowra Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
 $$\begin{array} { l r r } 
\text { Month } & \text { Cost } & \text { Hours } \
\text { January } & \$ 40000 & 3500 \
\text { February } & 24400 & 2000 \
\text { March } & 31280 & 2450 \
\text { April } & 36400 & 3000 \
\text { May } & 44160 & 3900 \
\text { June } & 42400 & 3740
\end{array}$$
-What is the estimated total cost at an operating level of 2850 hours?

Accepted Answer

A) $34 736 
B) $33 240 
C) $25 692 
D) $32 016 
A) $34 736 
B) $33 240 
C) $25 692 
D) $32 016

Question 13

The cost function y = 100 + 10X:

Accepted Answer

A) represents a fixed cost. 
B) is a nonlinear. 
C) has an intercept of 100. 
D) has a slope coefficient of 100. 
A) represents a fixed cost. 
B) is a nonlinear. 
C) has an intercept of 100. 
D) has a slope coefficient of 100.

Question 14

A plot of data that results in bunched points with little slope generally indicates a:

Accepted Answer

A) negative relationship. 
B) strong relationship. 
C) weak relationship. 
D) positive relationship. 
A) negative relationship. 
B) strong relationship. 
C) weak relationship. 
D) positive relationship.

Question 15

Answer the following questions using the information below:
Hewitt Sporting Goods Store is a small company that has hired you to perform some management advisory services.The following information pertains to 2018 operations.
 $\begin{array}{lr}
\text { Sales (2000 cricket bats) } & \$ 900000 \
\text { Cost of goods sold } & 400000 \
\text { Store manager's salary per year } & 70000 \
\text { Operating costs per year } & 157000 \
\text { Advertising and promotion per year } & 15000 \
\text { Commissions ( } 4 \% \text { of sales) } & 36000
\end{array}$
-What were total fixed costs for 2018?

Accepted Answer

A) $227 000 
B) $678 000 
C) $242 000 
D) $436 000 
A) $227 000 
B) $678 000 
C) $242 000 
D) $436 000

Question 16

Generally,a coefficient of determination (r2)that is less than 0.30 indicates a goodness of fit.

Accepted Answer

A) True 
 B)False

Question 17

An 'experience curve':

Accepted Answer

A) measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases. 
B) only measures the decline in labour-hours per unit as units produced increases. 
C) measures the increase in cost per unit as productivity increases. 
D) is a narrower application of the learning curve. 
A) measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases. 
B) only measures the decline in labour-hours per unit as units produced increases. 
C) measures the increase in cost per unit as productivity increases. 
D) is a narrower application of the learning curve.

Question 18

Any linear cost function can be graphed by knowing only the slope coefficient.

Accepted Answer

A) True 
 B)False

Question 19

Answer the following questions using the information below:
The Nowra Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable.Nowra Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
 $$\begin{array} { l r r } 
\text { Month } & \text { Cost } & \text { Hours } \
\text { January } & \$ 40000 & 3500 \
\text { February } & 24400 & 2000 \
\text { March } & 31280 & 2450 \
\text { April } & 36400 & 3000 \
\text { May } & 44160 & 3900 \
\text { June } & 42400 & 3740
\end{array}$$
-The Canberra Corporation used regression analysis to predict the annual cost of indirect materials.The results were as follows:
$\text { Indirect Materials Cost Explained by Units Produced }$
$\begin{array}{lr}
\text { Constant } & \$ 21890 \
\text { Standard error of } Y \text { estimate } & \$ 4560 \
\mathrm{r}^{2} & 0.7832 \
\text { Number of observations } & 22 \
& \
\text { X coefficient(s) } & 11.75 \
\text { Standard error of coefficient(s) } & 2.1876
\end{array}$
What is the linear cost function?

Accepted Answer

A) Y = $4560 + $5.15X 
B) Y = $20 100 + $4.60X 
C) Y = $21 890 + $11.75X 
D) None of these answers are correct. 
A) Y = $4560 + $5.15X 
B) Y = $20 100 + $4.60X 
C) Y = $21 890 + $11.75X 
D) None of these answers are correct.

Question 20

Regression analysis:

Accepted Answer

A) uses the constant to measure goodness of fit. 
B) is simple to compute. 
C) is mathematical so it does not require an understanding of operations. 
D) measures the change in a dependent variable associated with one or more independent variables. 
A) uses the constant to measure goodness of fit. 
B) is simple to compute. 
C) is mathematical so it does not require an understanding of operations. 
D) measures the change in a dependent variable associated with one or more independent variables.

The cost function y = 80 + 4X:

The smaller the residual term,the:

Economic plausibility is an important criterion for choosing a cost driver.

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

The most common forms of quantitative analysis are the 'conference method' and the 'account analysis method'.

Akama Allambee,controller,gathered data on overhead costs and direct labour-hours over the past 12 months.List and discuss the different approaches Akama can use to estimate a cost function for overhead costs using direct labour-hours as the cost driver. _

Accurate cost estimation is useful both in understanding past cost relationships and as a means of predicting costs.

What are the two assumptions behind a simple linear cost function? Briefly explain the three ways that a linear cost function may behave. _ _

Misinterpretation of data can arise when fixed costs are reported on a per unit basis.

The cost function y = 100 + 10X:

A plot of data that results in bunched points with little slope generally indicates a:

Generally,a coefficient of determination (r²)that is less than 0.30 indicates a goodness of fit.

An 'experience curve':

Any linear cost function can be graphed by knowing only the slope coefficient.

Regression analysis:

Management Accounting in Context

Different Costs for Different Purposes

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Exam 3: Determining How Costs Behave

The cost function y = 80 + 4X:

The smaller the residual term,the:

Economic plausibility is an important criterion for choosing a cost driver.

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

The most common forms of quantitative analysis are the 'conference method' and the 'account analysis method'.

Accurate cost estimation is useful both in understanding past cost relationships and as a means of predicting costs.

Misinterpretation of data can arise when fixed costs are reported on a per unit basis.

The cost function y = 100 + 10X:

A plot of data that results in bunched points with little slope generally indicates a:

Generally,a coefficient of determination (r2)that is less than 0.30 indicates a goodness of fit.

An 'experience curve':

Any linear cost function can be graphed by knowing only the slope coefficient.

Regression analysis:

Management Accounting in Context

Different Costs for Different Purposes

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Generally,a coefficient of determination (r²)that is less than 0.30 indicates a goodness of fit.