Question 1

Extreme values of observations may be the result of:

Accepted Answer

A) a temporary plant shutdown. 
B) a misplaced decimal point in the recorded data. 
C) classifying a cost incorrectly. 
D) All of these answers are correct. 
A) a temporary plant shutdown. 
B) a misplaced decimal point in the recorded data. 
C) classifying a cost incorrectly. 
D) All of these answers are correct.

Question 2

Jeff Walker Manufacturing Company produces inventory in a highly automated assembly plant in Newcastle.The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes.For the first six months of operations,the following data were collected:
 $$\begin{array} { l c c c } 
& \text { Machine-hours } & \text { Kilowatt-hours } & \text { Total Overhead Costs } \
\text { January } & 3800 & 4520000 & \$ 138000 \
\text { February } & 3650 & 4340000 & 136800 \
\text { March } & 3900 & 4500000 & 139200 \
\text { April } & 3300 & 4290000 & 136800 \
\text { May } & 3250 & 4200000 & 126000 \
\text { June } & 3100 & 4120000 & 120000
\end{array}$$ 
Required:
a.Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.
b.Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver.
c.For July,the company ran the machines for 3000 hours and used 4 000 000 kilowatt-hours of power.The overhead costs totalled $114 000.Which cost driver was the best predictor for July?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Machine-hours:
Slope coefficient = ($1

Question 3

To complete the first set-up on a new machine took an employee 200 minutes.Using an 80% cumulative average-time learning curve indicates that the second set-up on the new machine is expected to take:

Accepted Answer

A) 60 minutes. 
B) 120 minutes. 
C) 80 minutes. 
D) 160 minutes. 
A) 60 minutes. 
B) 120 minutes. 
C) 80 minutes. 
D) 160 minutes.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The high-low method:

Accepted Answer

A) easily handles estimating the relationship between the dependent variable and two or more independent variables. 
B) uses the residual term to measure goodness of fit. 
C) is more accurate than the regression method. 
D) calculates the slope coefficient using only two observed values within the relevant range. 
A) easily handles estimating the relationship between the dependent variable and two or more independent variables. 
B) uses the residual term to measure goodness of fit. 
C) is more accurate than the regression method. 
D) calculates the slope coefficient using only two observed values within the relevant range.

Question 6

Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.

Accepted Answer

A) True 
 B)False

Question 7

When using the high-low method,the denominator of the equation that determines the slope is the:

Accepted Answer

A) independent variable. 
B) difference between the high and low observations of the dependent variables. 
C) dependent variable. 
D) difference between the high and low observations of the cost driver. 
A) independent variable. 
B) difference between the high and low observations of the dependent variables. 
C) dependent variable. 
D) difference between the high and low observations of the cost driver.

Question 8

The managers of the production department have decided to use the production levels of 2012 and 2018 as examples of the highest and lowest years of operating levels.Data for those years are as follows:
 $$\begin{array} { c c c } 
\text { Year } & \text { Chemicals Used } & \text { Overhead Costs } \
2012 & 200000 \text { litres } & \$ 135000 \
2018 & 150000 \text { litres } & \$ 105000
\end{array}$$ 
Required:
What is the cost estimating equation for the department if litres of chemicals are used as the cost driver?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

Slope (variable cost)= ($135 0

Question 9

When new products are introduced,learning curve effects can have a major influence on production scheduling.

Accepted Answer

A) True 
 B)False

Question 10

List and briefly describe the six steps in estimating a cost function under quantitative analysis.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

1.The first step is to select the depend

Question 11

The cost components of an air conditioner include $35 for the compressor;$11.50 for the sheet moulded compound frame;and $80 per unit for assembly.The factory machines and tools cost is $55 000.The company expects to produce 1500 air conditioners in the coming year.What cost function best represents these costs?

Accepted Answer

A) y = 55 000 + 126.50X 
B) y = 55 000 + 1500X 
C) y = 1500 + 126.5X 
D) y = 1500 + 55 000X 
A) y = 55 000 + 126.50X 
B) y = 55 000 + 1500X 
C) y = 1500 + 126.5X 
D) y = 1500 + 55 000X

Question 12

Answer the following questions using the information below:
At the Holden Company,the cost of the library and information centre 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 centre costs.
Total library and information centre costs are $75 000.
 $\begin{array}{lrrr}
\text { Department } & \underline{\mathbf{A}} & \underline{\mathbf{B}} & \mathbf{C} \
\text { Number of employees } & 125 & 500 & 125 \
\text { Number of engineers } & 0 & 75 & 25
\end{array}$
-Which cost estimation method is being used by Holden Company?

Accepted Answer

A) The account analysis method 
B) The quantitative analysis method 
C) The industrial engineering method 
D) The conference method 
A) The account analysis method 
B) The quantitative analysis method 
C) The industrial engineering method 
D) The conference method

Question 13

Inflation is a fact,and therefore its influence should not be removed from the data.

Accepted Answer

A) True 
 B)False

Question 14

In regression analysis,the term 'goodness of fit' indicates the strength of the relationship between the cost driver and the costs.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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.
 $$\begin{array} { l r r } 
\text { Month } & \text { Cost } & \text { Hours } \
\text { January } & \$ 40000 & 3500 \
\text { February } & 24400 & 2000 \
\text { March } & 31280 & 2450 \
\text { April } & 36400 & 3000 \
\text { May } & 44160 & 3900 \
\text { June } & 42400 & 3740
\end{array}$$
-Craig's Cola is to manufacture 1000 cases of cola next week.The accountant provided the following analysis of total manufacturing costs:
$$\begin{array}{l}
\begin{array} { l c c c } 
\text { Variable } & \text { Coefficient } & \text { Standard Error } & \text { t-Value } \
\text { Constant } & 100 & 71.94 & 1.39 \
\text { Independent variable } & 200 & 91.74 & 2.18
\end{array}\
r ^ { 2 } = 0.82
\end{array}$$
What is the estimated cost of producing the 1000 cases of cola?

Accepted Answer

A) $200 100 
B) $9000 
C) $142 071 
D) $100 200 
A) $200 100 
B) $9000 
C) $142 071 
D) $100 200

Question 17

Data collection problems arise when:

Accepted Answer

A) accrual-basis costs are used rather than cash-basis costs. 
B) fixed and variable costs are not separately identified and both are allocated to products on a per unit basis. 
C) data are recorded electronically rather than manually. 
D) purely inflationary price effects are removed. 
A) accrual-basis costs are used rather than cash-basis costs. 
B) fixed and variable costs are not separately identified and both are allocated to products on a per unit basis. 
C) data are recorded electronically rather than manually. 
D) purely inflationary price effects are removed.

Question 18

Collecting data on the dependent variable and the cost driver may include:

Accepted Answer

A) collecting data from different entities over the same period of time. 
B) interviews with managers. 
C) collecting data over a long period of time. 
D) All of these answers are correct. 
A) collecting data from different entities over the same period of time. 
B) interviews with managers. 
C) collecting data over a long period of time. 
D) All of these answers are correct.

Question 19

Each cost pool may have multiple cost allocation bases.

Accepted Answer

A) True 
 B)False

Question 20

A 'learning curve' is a function:

Accepted Answer

A) that increases at a greater rate as workers become more familiar with their tasks. 
B) where unit costs increase as productivity increases. 
C) that measures the decline in labour-hours per unit due to workers becoming better at a job. 
D) that is linear. 
A) that increases at a greater rate as workers become more familiar with their tasks. 
B) where unit costs increase as productivity increases. 
C) that measures the decline in labour-hours per unit due to workers becoming better at a job. 
D) that is linear.

Extreme values of observations may be the result of:

To complete the first set-up on a new machine took an employee 200 minutes.Using an 80% cumulative average-time learning curve indicates that the second set-up on the new machine is expected to take:

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

The high-low method:

Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.

When using the high-low method,the denominator of the equation that determines the slope is the:

When new products are introduced,learning curve effects can have a major influence on production scheduling.

List and briefly describe the six steps in estimating a cost function under quantitative analysis. _ _

Inflation is a fact,and therefore its influence should not be removed from the data.

In regression analysis,the term 'goodness of fit' indicates the strength of the relationship between the cost driver and the costs.

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

Data collection problems arise when:

Collecting data on the dependent variable and the cost driver may include:

Each cost pool may have multiple cost allocation bases.

A 'learning curve' is a function:

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

Extreme values of observations may be the result of:

To complete the first set-up on a new machine took an employee 200 minutes.Using an 80% cumulative average-time learning curve indicates that the second set-up on the new machine is expected to take:

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

The high-low method:

Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.

When using the high-low method,the denominator of the equation that determines the slope is the:

When new products are introduced,learning curve effects can have a major influence on production scheduling.

List and briefly describe the six steps in estimating a cost function under quantitative analysis. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Inflation is a fact,and therefore its influence should not be removed from the data.

In regression analysis,the term 'goodness of fit' indicates the strength of the relationship between the cost driver and the costs.

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

Data collection problems arise when:

Collecting data on the dependent variable and the cost driver may include:

Each cost pool may have multiple cost allocation bases.

A 'learning curve' is a function:

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

List and briefly describe the six steps in estimating a cost function under quantitative analysis. _ _