Exam 3: Measurement of Cost Behavior

Due to the use of statistics,least squares regression analysis estimates a cost function more ________ than other cost measurement methods.

To assess the ________ of estimates from regression analysis,we use the ________.

The Dorkin Company used regression analysis to predict the annual cost of indirect materials.The results were as follows: Indirect Materials Cost Explained by Units Produced Constant 4,200 Standard error of Y estimate 2,300 R-Squared 0.78 No, of observations 22 Degrees of freedom 20 X Coefficient 250.25 Standarderror of coefficient 22.25 The total fixed cost is ________.

An activity analysis has shown that the number of components added to Product X and Product Y is the cost driver for support costs.Support costs are $20 per component.Product X has 4 components and Product Y has 8 components.What amounts of support costs should be assigned to Product X and Product Y? Product X Product Y A) \ 6.67 \ 13.33 B) \ 20 \ 20 C) \ 80 \ 160 D) \ 80 \ 320

Account analysis is one method of approximating cost functions.

Which of the following costs can be canceled in the short run?

A cost function is an algebraic equation used to describe the relationship between a cost and its cost driver(s).

Managers should apply plausibility and reliability to obtain accurate and useful cost functions.

Account analysis and engineering analysis will remain the ________ methods of measuring cost behavior because the other methods ________.

A cost function with one independent variable is estimated with least squares regression.The coefficient of determination for the equation is 0.50.This statistic indicates that ________.

Sandler Company manufactures electronic devices.The company is considering three cost drivers for measuring maintenance costs in the factory.The following cost functions have been estimated using each cost driver: Cost Driver Cost Function 1. X= number of parts Y=\ 20,000+\ 5X =0.40 2. X= number of labor hours Y=\ 13,000+\ 10X =0.95 3. X= number of machine hours Y=\ 15,000+\ 7X =0.30 Which cost driver should be chosen?

In the linear cost function derived from regression analysis,the cost driver is the ________ variable and the cost to be explained is the ________ variable.

Companies may be forced to use engineering analysis or account analysis to estimate cost functions because ________.

A disadvantage of engineering analysis which is used to estimate cost functions is ________.

In a corporate setting,property taxes are an example of a(n)________.

In order to estimate cost functions using account analysis,users rely on the ________ for information about cost behavior.

A disadvantage of the high-low method to estimate a cost function is ________.

The methods to approximate cost functions are not ________; managers frequently use two or more together to avoid ________ in measuring cost behavior.

The cost of the Maintenance Department at Forest Manufacturing has always been charged to the production departments based on the number of employees.Recently,an activity analysis of possible cost drivers was performed which indicated that the square feet of space may also be a predictor of costs to be assigned to each production department.The Maintenance Department cost is $500,000.The following data is available: Production Departments Dept. A Dept. B Dept. C Number of Employees 300 25 50 Square Feet of Space 5,000 10,000 25,000 Required: 1.Determine the amount of the maintenance department cost that should be allocated to Department A and Department B if the cost driver used is: (A)number of employees and (B)square feet of space. 2.Does the choice of the cost driver affect the costs assigned to each department?

The following data has been assembled for John Company.Use the high-low method. Month Cost Hours: January \ 24,400 2,000 February \ 39,000 2,200 March \ 35,280 2,750 April \ 36,400 3,500 May \ 40,000 4,000 The expected total cost at an operating level of 1,900 hours is ________.