Question 1

Costs incurred in detecting which of the individual units do not conform to specifications are called

Accepted Answer

A) correction costs. 
B) external failure costs. 
C) internal failure costs. 
D) prevention costs. 
E) appraisal costs. 
A) correction costs. 
B) external failure costs. 
C) internal failure costs. 
D) prevention costs. 
E) appraisal costs.

Question 2

Brown Laundry has a variable demand.The daily demand ranges from 100 to 140 customers a day with an average of 5 items.The average daily demand is 110 customers.The laundry operates 10 hours a day.Each order takes approximately 5 minutes.
Required:
a.What is the average customer waiting time in minutes?
b.What is the cycle time for an order?
c.The manager has decided that the waiting time is too long and has increased the work day to 11 hours.What is the waiting time now? Will the customers be any happier?

Accepted Answer

a.Waiting minutes = [110 × 5²]/[2 × (600

Question 3

Answer the following question(s)using the information below:
The tool crib at a large manufacturing company is responsible for providing tools to the factory workers on demand.The tool crib has a variable demand.Historically,its demand has ranged from 150 to 250 small tools per day with an average of 200.Diane,the tool crib attendant,works eight hours a day,five days a week.Each order is for one small tool and each small tool takes Diane 2 minutes to retrieve from the bins.
-What is the tool crib cycle time for an order?

Accepted Answer

A) 2 minutes per tool 
B) 3 minutes per tool 
C) 5 minutes per tool 
D) 7 minutes per tool 
E) 4 minutes per tool 
A) 2 minutes per tool 
B) 3 minutes per tool 
C) 5 minutes per tool 
D) 7 minutes per tool 
E) 4 minutes per tool

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

________ refers to the average amount of time that an order will be in line before it is set up and processed.

Accepted Answer

A) Average manufacturing cycle time 
B) Average customer response time 
C) Average waiting time 
D) Average on-time performance 
E) Average setup time (per cycle) 
A) Average manufacturing cycle time 
B) Average customer response time 
C) Average waiting time 
D) Average on-time performance 
E) Average setup time (per cycle)

Question 6

Which of the following statements regarding a linear cost function is TRUE?

Accepted Answer

A) When there are only fixed costs,total material costs increase as the number of units produced increases. 
B) The slope coefficient of a mixed cost line intersects the vertical axis at zero. 
C) The relationship between the cost driver and the fixed cost is represented by the cost-benefit relationship. 
D) It is easier to identify a single measure of benefit in a more heterogeneous cost pool. 
E) A linear cost function for manufacturing overhead can be graphed when their is a cause-and-effect relationship between the level of activity and the costs related to that level of activity. 
A) When there are only fixed costs,total material costs increase as the number of units produced increases. 
B) The slope coefficient of a mixed cost line intersects the vertical axis at zero. 
C) The relationship between the cost driver and the fixed cost is represented by the cost-benefit relationship. 
D) It is easier to identify a single measure of benefit in a more heterogeneous cost pool. 
E) A linear cost function for manufacturing overhead can be graphed when their is a cause-and-effect relationship between the level of activity and the costs related to that level of activity.

Question 7

Two important drivers of time are limited capacity and bottlenecks.

Accepted Answer

A) True 
 B)False

Question 8

The collection of information on costs and their drivers,gathered through observations and interviews,from departments within an organization is known as the

Accepted Answer

A) account analysis method. 
B) conference method. 
C) industrial-engineering method. 
D) quantitative analysis method. 
E) departmental analysis method. 
A) account analysis method. 
B) conference method. 
C) industrial-engineering method. 
D) quantitative analysis method. 
E) departmental analysis method.

Question 9

Warranty repair costs are

Accepted Answer

A) prevention costs. 
B) appraisal costs. 
C) an internal failure cost. 
D) a marketing cost. 
E) an external failure cost. 
A) prevention costs. 
B) appraisal costs. 
C) an internal failure cost. 
D) a marketing cost. 
E) an external failure cost.

Question 10

Customer response time is the time between when a company first markets a new product,and when sales exceed supplies on hand (test inventory).

Accepted Answer

A) True 
 B)False

Question 11

The number of defects in units shipped to customers as a percentage of total units shipped,is a non-financial measure.

Accepted Answer

A) True 
 B)False

Question 12

The coefficient of determination (r2)measures the percentage of variation in Y explained by X (the independent variable).

Accepted Answer

A) True 
 B)False

Question 13

What common sense criteria should be applied to statistical analysis when evaluating cost drivers using regression analysis?

Accepted Answer

A) goodness of fit 
B) economic plausibility 
C) the significance of the difference between the costs associated with the highest and lowest observations of the cost driver 
D) the significance of the difference between the unit values for the highest and lowest observations of the cost driver 
E) the Durbin-Watson statistic 
A) goodness of fit 
B) economic plausibility 
C) the significance of the difference between the costs associated with the highest and lowest observations of the cost driver 
D) the significance of the difference between the unit values for the highest and lowest observations of the cost driver 
E) the Durbin-Watson statistic

Question 14

Use the information below to answer the following question(s).
Dylan Products has a budget of $1,200,000 in 2015 for prevention costs.If it decides to automate a portion of its prevention activities,it will save $90,000 in variable costs.The new method will require $40,000 in training costs and $150,000 in annual equipment costs.Management is willing to adjust the budget for an amount up to the cost of the new equipment.The budgeted production level is 210,000 units.
Appraisal costs for the year are budgeted at $500,000.The new prevention procedures will save appraisal costs of $50,000.Internal failure costs average $20 per failed unit of finished goods.The internal failure rate is expected to be 4% of all completed items.The proposed changes will cut the internal failure rate by one-half.Internal failure units are destroyed.External failure costs average $48 per failed unit.The company's average external failures average 2.5% of units sold.The new proposal will reduce this rate to 1%.Assume all units produced are sold and there are no ending inventories.
-How much will appraisal costs change assuming that the new prevention methods reduce material failures by 30% in the appraisal phase?

Accepted Answer

A) $150,000 decrease 
B) $229,000 decrease 
C) $50,000 increase 
D) $50,000 decrease 
E) $84,000 decrease 
A) $150,000 decrease 
B) $229,000 decrease 
C) $50,000 increase 
D) $50,000 decrease 
E) $84,000 decrease

Question 15

A learning curve is a function that measures how labour-hours per unit decrease,as units of production increase.

Accepted Answer

A) True 
 B)False

Question 16

Manufacturing lead time includes

Accepted Answer

A) all indirect time. 
B) waiting time. 
C) marketing time. 
D) time to process the customer's order to delivery. 
E) all indirect time and waiting time. 
A) all indirect time. 
B) waiting time. 
C) marketing time. 
D) time to process the customer's order to delivery. 
E) all indirect time and waiting time.

Question 17

Preventive equipment maintenance is an example of

Accepted Answer

A) prevention costs. 
B) appraisal costs. 
C) internal failure costs. 
D) external failure costs. 
E) rework costs. 
A) prevention costs. 
B) appraisal costs. 
C) internal failure costs. 
D) external failure costs. 
E) rework costs.

Question 18

Manufacturing lead times can affect costs but do not affect sales revenue.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements about the cost estimation methods is FALSE?

Accepted Answer

A) With the conference method,the accuracy of the cost estimates largely depends on the accuracy and details of the inputs. 
B) The methods require more historical data than most quantitative analysis. 
C) The methods are not mutually exclusive. 
D) There are four methods generally used for cost estimation. 
E) Many organizations use a combination of the approaches. 
A) With the conference method,the accuracy of the cost estimates largely depends on the accuracy and details of the inputs. 
B) The methods require more historical data than most quantitative analysis. 
C) The methods are not mutually exclusive. 
D) There are four methods generally used for cost estimation. 
E) Many organizations use a combination of the approaches.

Question 20

A better database for estimating cost functions has the following characteristics.

Accepted Answer

A) Fixed costs are allocated as if they are variable costs. 
B) Extreme observations are adjusted or removed. 
C) Time periods differ for measuring items included in the dependent variable and the cost driver(s). 
D) Homogeneous relationships between individual cost items in the dependent variable pool and cost drivers may not be present. 
E) There is no causal,economically plausible relationship between individual cost items in a heterogeneous mixed pool and a single cost driver. 
A) Fixed costs are allocated as if they are variable costs. 
B) Extreme observations are adjusted or removed. 
C) Time periods differ for measuring items included in the dependent variable and the cost driver(s). 
D) Homogeneous relationships between individual cost items in the dependent variable pool and cost drivers may not be present. 
E) There is no causal,economically plausible relationship between individual cost items in a heterogeneous mixed pool and a single cost driver.

Costs incurred in detecting which of the individual units do not conform to specifications are called

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

________ refers to the average amount of time that an order will be in line before it is set up and processed.

Which of the following statements regarding a linear cost function is TRUE?

Two important drivers of time are limited capacity and bottlenecks.

The collection of information on costs and their drivers,gathered through observations and interviews,from departments within an organization is known as the

Warranty repair costs are

Customer response time is the time between when a company first markets a new product,and when sales exceed supplies on hand (test inventory).

The number of defects in units shipped to customers as a percentage of total units shipped,is a non-financial measure.

The coefficient of determination (r²)measures the percentage of variation in Y explained by X (the independent variable).

What common sense criteria should be applied to statistical analysis when evaluating cost drivers using regression analysis?

A learning curve is a function that measures how labour-hours per unit decrease,as units of production increase.

Manufacturing lead time includes

Preventive equipment maintenance is an example of

Manufacturing lead times can affect costs but do not affect sales revenue.

Which of the following statements about the cost estimation methods is FALSE?

A better database for estimating cost functions has the following characteristics.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 10: Analysis of Cost Behaviour

Costs incurred in detecting which of the individual units do not conform to specifications are called

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

________ refers to the average amount of time that an order will be in line before it is set up and processed.

Which of the following statements regarding a linear cost function is TRUE?

Two important drivers of time are limited capacity and bottlenecks.

The collection of information on costs and their drivers,gathered through observations and interviews,from departments within an organization is known as the

Warranty repair costs are

Customer response time is the time between when a company first markets a new product,and when sales exceed supplies on hand (test inventory).

The number of defects in units shipped to customers as a percentage of total units shipped,is a non-financial measure.

The coefficient of determination (r2)measures the percentage of variation in Y explained by X (the independent variable).

What common sense criteria should be applied to statistical analysis when evaluating cost drivers using regression analysis?

A learning curve is a function that measures how labour-hours per unit decrease,as units of production increase.

Manufacturing lead time includes

Preventive equipment maintenance is an example of

Manufacturing lead times can affect costs but do not affect sales revenue.

Which of the following statements about the cost estimation methods is FALSE?

A better database for estimating cost functions has the following characteristics.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

The coefficient of determination (r²)measures the percentage of variation in Y explained by X (the independent variable).