Exam 3: Measurement of Cost Behavior

Direct labor cost is the primary cost driver of support costs for two products.Product One has direct labor costs of $8.50 per unit and Product Two has direct labor costs of $130 per unit.The support costs assigned to each product is the direct labor cost times five.What is the support cost assigned to Product One and Product Two? Product One Product Two A) \ 8.50 \ 130 B) \ 5.00 \ 76.47 C) \ 42.50 \ 650 D) \ 5.00 \ 26.00

Biden Company manufactures small jewelry boxes.The company is considering three cost drivers for measuring support costs in the factory.The following cost functions have been estimated using each cost driver: Cost Driver Cost Function 1. X= gluing time in hours Y=\ 20,000+\ 5X =0.20 2. X= labor hours Y=\ 13,000+\ 10X =0.55 3. X= machine hours Y=\ 15,000+\ 7X =0.90 Which cost driver should be chosen?

In a corporate setting,a mortgage payment would be identified as a ________.

A car lease payment is computed based solely on the number of miles driven.This is an example of a ________.

Consider the following linear mixed-cost function: Y = $120,000 + $2.70X Where: $\quad Y =$ total annual maintenance cost $X =$ mumber of patient-days What does the $120,000 represent?

In a linear cost function estimated by regression analysis,the constant or intercept measures variable cost per unit of the cost driver.

The high-low,visual-fit and least squares regression methods are more objective methods to estimate cost functions than ________ and ________.

Most companies make capacity decisions frequently.

Simon Inc.currently produces 110,000 units at a cost of $440,000.The cost is variable.Next year Simon Inc.expects to produce 115,000 units.Simon's relevant range for production is 100,000 to 120,000 units.If 115,000 units are produced next year,what is the expected variable cost?

Goodness of fit pertains to how well a cost function predicts cost behavior.

________ have no obvious relationship to levels of output activity,but are determined as part of the periodic planning process.

A disadvantage of the visual-fit method to approximate a cost function is ________.

In regression analysis,a lower coefficient of determination is better than a higher one.

With the high-low method,the most accurate way to measure the intercept and slope for a cost function is to ________.

The greatest benefit of activity analysis is that it directs management accountants to the ________.

The use of high technology equipment to manufacture products instead of highly skilled labor usually results in ________.

Only major changes in the scale or scope of operations can change ________ in future periods.Managers can vary spending levels for ________ in the short run.

Regression analysis uses ________ to fit a cost function to all the historical data.

Presented below is the production data for six months showing the mixed costs incurred by Anderson Company. Month Cost Units July \ 5,890 4,100 August \ 4,012 3,200 September \ 7,480 6,300 October \ 9,000 7,500 November \ 5,800 5,800 December \ 7,336 6,600 Anderson Company uses the high-low method to analyze mixed costs.The cost function is ________ where Y= Total Cost and X= Number of units.

When referring to a cost function,plausibility refers to whether you can rely upon the cost function for predicting the future.