Question 1

Which of the following statements is true of activity-based costing?

Accepted Answer

A)  There is a clear cause-and-effect relationship between costs and the cost driver in the long run. 
B)  There is no variety of cost drivers and cost pools. 
C)  The system focuses on activities in together and not on individual activities. 
D)  A single cost driver should be identified for all the activities. 
A)  There is a clear cause-and-effect relationship between costs and the cost driver in the long run. 
B)  There is no variety of cost drivers and cost pools. 
C)  The system focuses on activities in together and not on individual activities. 
D)  A single cost driver should be identified for all the activities. A

Question 2

Simple regression analysis estimates the relationship between the dependent variable and one independent variable.

Accepted Answer

A) True 
 B)False  True

Question 3

Simple regression analysis estimates the relationship between the dependent variable and one independent variable.

Accepted Answer

A) True 
 B)False  True

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

Answer the following questions using the information below:
Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is provided below:
 $\begin{array}{lll}&\text { Machine-hours } & \text { Labor Costs }\
\text { Highest observation of cost driver } & 550 & \$ 22,000 \
\text { Lowest observation of cost driver } & 250 & \$ 13,000
\end{array}$
-What is the estimated total cost when 400 machine-hours are used?

Accepted Answer

A)  $20,800 
B)  $29,000 
C)  $16,000 
D)  $17,500 
A)  $20,800 
B)  $29,000 
C)  $16,000 
D)  $17,500

Question 6

Harold's Picture manufactures various picture frames.Each new employee takes 6 hours to make the first picture frame and 4.8 hours to make the second.The manufacturing overhead charge per hour is $25.
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

a.11ee5acb_5

Question 7

In using high-low method,the slope coefficient is calculated by dividing the difference between highest and lowest observations of the cost driver by the difference between costs associated with highest and lowest observations of the cost driver.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an example of nonlinear cost function?

Accepted Answer

A)  variable-cost functions 
B)  fixed-cost functions 
C)  learning curves 
D)  mixed cost functions 
A)  variable-cost functions 
B)  fixed-cost functions 
C)  learning curves 
D)  mixed cost functions

Question 10

At the Auric 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.
 $$\begin{array}{l}
\text { Total personnel department costs are } \$ 287,500 \text {. }\
\begin{array} { l r r r } 
\text { Department } & \underline { \mathbf { A } } & \underline { \mathbf { B } } & \underline { \mathbf { C } } \
\text { Number of employees } & 70 & 280 & 225 \
\text { Number of new hires } & 25 & 13 & 12
\end{array}
\end{array}$$
-If the number of new hires is considered the cost driver,what amount of personnel costs will be allocated to Department A?

Accepted Answer

A)  $35,000 
B)  $10,667 
C)  $143,750 
D)  $43,700 
A)  $35,000 
B)  $10,667 
C)  $143,750 
D)  $43,700

Question 11

Answer the following questions using the information below:
The Frontive Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Frontive Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
 $\begin{array}{rr}\text { Cost}&\text {  Hours }\
\$ 24,700 & 5,000 \
26,000 & 5,500 \
34,000 & 7,500 \
45,370 & 10,300 \
38,000 & 9,500
\end{array}$
-What is the estimated total cost at an operating level of 9,000 hours?

Accepted Answer

A)  $35,100 
B)  $40,300 
C)  $44,460 
D)  $39,644 
A)  $35,100 
B)  $40,300 
C)  $44,460 
D)  $39,644

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The account analysis method estimates cost functions ________.

Accepted Answer

A)  by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis 
B)  using time-and-motion studies 
C)  at a high cost, which renders it seldom used 
D)  in a manner that cannot be usefully combined with any other cost estimation methods 
A)  by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis 
B)  using time-and-motion studies 
C)  at a high cost, which renders it seldom used 
D)  in a manner that cannot be usefully combined with any other cost estimation methods

Question 14

Corise's Cola was to manufacture 500 cases of cola next week.The accountant provided the following analysis of total manufacturing costs. $\begin{array}{lrrr}\text { Variable } & \text { Coefficient } &
\text { Standard Error } & \text { t-Value }\
\text { Constant } & 115 & 82.73 & 1.39 \
\text { Independent variable } & 230 & 105.50 & 2.18 \
\mathrm{r}^{2}=0.82 & & &
\end{array}$ What is the estimated cost of producing the 500 cases of cola?

Accepted Answer

A)  $115,115 
B)  $57,730 
C)  $24,380 
D)  $9,744 
A)  $115,115 
B)  $57,730 
C)  $24,380 
D)  $9,744

Question 15

Which of the following represents cross-sectional data?

Accepted Answer

A)  indirect manufacturing labor costs for the past 5 years 
B)  number of machine-hours used for the past 10 years 
C)  personnel costs of a month at 10 different organizations 
D)  maintenance cost of machine in a plant for the past 3 years 
A)  indirect manufacturing labor costs for the past 5 years 
B)  number of machine-hours used for the past 10 years 
C)  personnel costs of a month at 10 different organizations 
D)  maintenance cost of machine in a plant for the past 3 years

Question 16

Answer the following questions using the information below:
Syosis Company uses the high-low method to estimate its cost function. The information for 2015 is provided below:
 $\begin{array}{lll}&\text { Machine-hours }& \text { Costs }\
\text { Highest observation of cost driver } & 2,500 & \$ 300,000 \
\text { Lowest observation of cost driver } & 1,500 & \$ 220,000
\end{array}$
-What is the estimated total cost when 1,300 machine-hours are used?

Accepted Answer

A)  $411,100 
B)  $204,000 
C)  $456,000 
D)  $156,000 
A)  $411,100 
B)  $204,000 
C)  $456,000 
D)  $156,000

Question 17

As part of his job as cost analyst,Max Thompson collected the following information concerning the operations of the Machining Department:
 $$\begin{array} { l c c } 
\text { Observation } & \text { Machine-hours } & \text { Total Operating Costs } \
\hline  \text { January } & 4,700 & \$ 43,000 \
\text { February } & 5,060 & 45,395 \
\text { March } & 4,180 & 42,535 \
\text { April } & 4,500 & 43,600 \
\text { May } & 4,250 & 42,890
\end{array}$$ Required:
a.Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.
b.If June's estimated machine-hours are 4,300,calculate the total estimated costs of the Machining Department?

Accepted Answer

a.Slope coefficient = ($45,395 − $42,535

Question 18

All other things being equal,the longer the time horizon the more likely a cost will be fixed.

Accepted Answer

A) True 
 B)False

Question 19

In the estimation of a cost function using quantitative analysis,the independent variable ________.

Accepted Answer

A)  is the cost to be predicted 
B)  is the product of fixed costs and slope coefficient 
C)  is the factor used to predict the dependent variable 
D)  is the product of total costs and slope coefficient 
A)  is the cost to be predicted 
B)  is the product of fixed costs and slope coefficient 
C)  is the factor used to predict the dependent variable 
D)  is the product of total costs and slope coefficient

Question 20

Answer the following questions using the information below:
Syosis Company uses the high-low method to estimate its cost function. The information for 2015 is provided below:
 $\begin{array}{lll}&\text { Machine-hours }& \text { Costs }\
\text { Highest observation of cost driver } & 2,500 & \$ 300,000 \
\text { Lowest observation of cost driver } & 1,500 & \$ 220,000
\end{array}$
-What is the slope coefficient?

Accepted Answer

A)  $120.00 
B)  $147.00 
C)  $80.00 
D)  $130.00 
A)  $120.00 
B)  $147.00 
C)  $80.00 
D)  $130.00

Which of the following statements is true of activity-based costing?

Simple regression analysis estimates the relationship between the dependent variable and one independent variable.

Simple regression analysis estimates the relationship between the dependent variable and one independent variable.

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

In using high-low method,the slope coefficient is calculated by dividing the difference between highest and lowest observations of the cost driver by the difference between costs associated with highest and lowest observations of the cost driver.

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

Which of the following is an example of nonlinear cost function?

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

The account analysis method estimates cost functions ________.

Which of the following represents cross-sectional data?

All other things being equal,the longer the time horizon the more likely a cost will be fixed.

In the estimation of a cost function using quantitative analysis,the independent variable ________.

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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

Which of the following statements is true of activity-based costing?

Simple regression analysis estimates the relationship between the dependent variable and one independent variable.

Simple regression analysis estimates the relationship between the dependent variable and one independent variable.

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

In using high-low method,the slope coefficient is calculated by dividing the difference between highest and lowest observations of the cost driver by the difference between costs associated with highest and lowest observations of the cost driver.

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

Which of the following is an example of nonlinear cost function?

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

The account analysis method estimates cost functions ________.

Which of the following represents cross-sectional data?

All other things being equal,the longer the time horizon the more likely a cost will be fixed.

In the estimation of a cost function using quantitative analysis,the independent variable ________.

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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