Question 1

The cost to be predicted is referred to as the ________.

Accepted Answer

A)  independent variable 
B)  dependent variable 
C)  cost driver 
D)  regression 
A)  independent variable 
B)  dependent variable 
C)  cost driver 
D)  regression

Question 2

The quantitative analysis method of cost estimation is based on opinions from various departments and is quick and of low cost to apply.

Accepted Answer

A) True 
 B)False

Question 3

Isondo's TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2015 operations.
 $$\begin{array} { l r } 
\text { Sales (1,200 televisions) } & \$ 1,200,000 \
\text { Cost of goods sold } & 540,000 \
\text { Store manager's salary per year } & 108,000 \
\text { Operating costs per year } & 216,000 \
\text { Advertising and promotion per year } & 24,000 \
\text { Commissions ( } 3 \% \text { of sales) } & 36,000
\end{array}$$
-What were total fixed costs for 2015?

Accepted Answer

A)  $924,000 
B)  $576,000 
C)  $348,000 
D)  $224,000 
A)  $924,000 
B)  $576,000 
C)  $348,000 
D)  $224,000

Question 4

Outside of the relevant range,variable and fixed cost-behavior patterns remain constant.

Accepted Answer

A) True 
 B)False

Question 5

Generally a coefficient of determination (r2)of 0.30 or higher passes a goodness of fit test.

Accepted Answer

A) True 
 B)False

Question 6

The high-low method is more accurate than the regression method of estimating a cost function.

Accepted Answer

A) True 
 B)False

Question 7

Answer the following questions using the information below:
Flify Manufacturing Inc., incurred total indirect manufacturing labor costs of $500,000. The company is labor intensive. Total labor hours during the period were 5,000. Using qualitative analysis, the manager and the management accountant determine that over the period the indirect manufacturing labor costs are mixed costs with only one cost driver-labor-hours. They separated the total indirect manufacturing labor costs into costs that are fixed ($110,000 based on 8,000 hours of labor) and costs that are variable ($390,000) based on the number of labor-hours used. The company has estimated 7,000 labor hours during the next period.
-What will be the variable cost per hour?

Accepted Answer

A)  $78 
B)  $48.75 
C)  $62.50 
D)  $100 
A)  $78 
B)  $48.75 
C)  $62.50 
D)  $100

Question 8

A learning curve measures the effect of learning on efficiency.

Accepted Answer

A) True 
 B)False

Question 9

Write a linear cost function equation for each of the following conditions.Use y for estimated costs and X for activity of the cost driver.
a.Direct materials cost is $1.70 per pound
b.Total cost is fixed at $8,000 per month regardless of the number of units produced.
c.Auto rental has a fixed fee of $80.00 per day plus $2.00 per mile driven.
d.Machine operating costs include $1,000 of maintenance per month,and $12.00 of coolant usage costs for each day the machinery is in operation.

Accepted Answer

a.y = $1.70X
b.y = $

Question 10

The smaller the residual terms,the ________.

Accepted Answer

A)  better is the fit between the actual cost observations and estimated costs 
B)  weaker the relationship between the cost driver and costs 
C)  more the number of units produced during the period 
D)  stronger the relationship between fixed cost and variable cost 
A)  better is the fit between the actual cost observations and estimated costs 
B)  weaker the relationship between the cost driver and costs 
C)  more the number of units produced during the period 
D)  stronger the relationship between fixed cost and variable cost

Question 11

Which of the following statements is true of a linear cost function?

Accepted Answer

A)  It presents variable cost as a slope coefficient. 
B)  It presents total cost as an intercept. 
C)  It presents variable cost as an intercept. 
D)  It presents total cost as slope coefficient. 
A)  It presents variable cost as a slope coefficient. 
B)  It presents total cost as an intercept. 
C)  It presents variable cost as an intercept. 
D)  It presents total cost as slope coefficient.

Question 12

The account analysis method estimates cost functions by classifying various cost accounts as variable,fixed,or mixed with respect to the identified level of activity.

Accepted Answer

A) True 
 B)False

Question 13

The dependent variable is a cost to be predicted and managed,whereas an independent variable or cost driver is the factor used to predict the dependent variable.

Accepted Answer

A) True 
 B)False

Question 14

An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.

Accepted Answer

A) True 
 B)False

Question 15

A homogeneous relationship exists when each activity whose costs are included in the dependent variable has the same cost driver.

Accepted Answer

A) True 
 B)False

Question 16

Schotte Manufacturing Company uses two different independent variables (machine-hours and number of packages)in two different equations to evaluate costs of the packaging department.The most recent results of the two regressions are as follows:
 Machine-hours:
$\begin{array}{lrrr}\text { Variable } & \text { Coeffcient }& \text { StandardError }& \text { t-Value }\
\text { Constant } & \$ 748.30 & \$ 341.20 & 2.19 \
\text { Independent Variable } & \$ 52.90 & \$ 35.20 & 1.50
\end{array}$
$\mathrm{r}^{2}=0.33$

$\text { Number of packages: }$
$\begin{array}{lrrr}\text { Variable } & \text { Coeffcient }& \text { StandardError }& \text { t-Value }\
\text { Constant } & \$ 242.90 & \$ 75.04 & 3.24 \
\text { Independent Variable } & \$ 5.60 & \$ 2.00 & 2.80
\end{array}$
$\mathrm{r}^{2}=0.73$ Required:
a.What are the estimating equations for each cost driver?
b.Which cost driver is best and why?

Accepted Answer

@#IMG-DLM& b.Machine-hours has a low r² which impli

Question 17

Answer the following questions using the information below:
Flify Manufacturing Inc., incurred total indirect manufacturing labor costs of $500,000. The company is labor intensive. Total labor hours during the period were 5,000. Using qualitative analysis, the manager and the management accountant determine that over the period the indirect manufacturing labor costs are mixed costs with only one cost driver-labor-hours. They separated the total indirect manufacturing labor costs into costs that are fixed ($110,000 based on 8,000 hours of labor) and costs that are variable ($390,000) based on the number of labor-hours used. The company has estimated 7,000 labor hours during the next period.
-What will be the total cost for the estimated 7,000 hours?

Accepted Answer

A)  $451,250 
B)  $547,500 
C)  $700,000 
D)  $656,000 
A)  $451,250 
B)  $547,500 
C)  $700,000 
D)  $656,000

Question 18

In a graphical display of a cost function,the steepness of a line represents the total amount of fixed costs.

Accepted Answer

A) True 
 B)False

Question 19

Discuss the potential use of nonlinear curves in cost functions and cost analysis.Give some examples.

Accepted Answer

Cost functions are not always linear.A n

Question 20

Multiple regression analysis estimates the relationship between the dependent variable and two or more independent variables.

Accepted Answer

A) True 
 B)False

The cost to be predicted is referred to as the ________.

The quantitative analysis method of cost estimation is based on opinions from various departments and is quick and of low cost to apply.

Outside of the relevant range,variable and fixed cost-behavior patterns remain constant.

Generally a coefficient of determination (r²)of 0.30 or higher passes a goodness of fit test.

The high-low method is more accurate than the regression method of estimating a cost function.

A learning curve measures the effect of learning on efficiency.

The smaller the residual terms,the ________.

Which of the following statements is true of a linear cost function?

The account analysis method estimates cost functions by classifying various cost accounts as variable,fixed,or mixed with respect to the identified level of activity.

The dependent variable is a cost to be predicted and managed,whereas an independent variable or cost driver is the factor used to predict the dependent variable.

An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.

A homogeneous relationship exists when each activity whose costs are included in the dependent variable has the same cost driver.

In a graphical display of a cost function,the steepness of a line represents the total amount of fixed costs.

Discuss the potential use of nonlinear curves in cost functions and cost analysis.Give some examples.

Multiple regression analysis estimates the relationship between the dependent variable and two or more independent variables.

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

The cost to be predicted is referred to as the ________.

The quantitative analysis method of cost estimation is based on opinions from various departments and is quick and of low cost to apply.

Outside of the relevant range,variable and fixed cost-behavior patterns remain constant.

Generally a coefficient of determination (r2)of 0.30 or higher passes a goodness of fit test.

The high-low method is more accurate than the regression method of estimating a cost function.

A learning curve measures the effect of learning on efficiency.

The smaller the residual terms,the ________.

Which of the following statements is true of a linear cost function?

The account analysis method estimates cost functions by classifying various cost accounts as variable,fixed,or mixed with respect to the identified level of activity.

The dependent variable is a cost to be predicted and managed,whereas an independent variable or cost driver is the factor used to predict the dependent variable.

An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs.

A homogeneous relationship exists when each activity whose costs are included in the dependent variable has the same cost driver.

In a graphical display of a cost function,the steepness of a line represents the total amount of fixed costs.

Discuss the potential use of nonlinear curves in cost functions and cost analysis.Give some examples.

Multiple regression analysis estimates the relationship between the dependent variable and two or more independent variables.

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

Generally a coefficient of determination (r²)of 0.30 or higher passes a goodness of fit test.