Question 1

When the cost object is a unit produced, straight-line depreciation on manufacturing equipment would be a: Variable Cost Fixed Cost Direct Cost

Accepted Answer

A) No Yes No 
B) Yes No No 
C) Yes No Yes 
D) No Yes Yes 
A) No Yes No 
B) Yes No No 
C) Yes No Yes 
D) No Yes Yes

Question 2

All of the following are assumptions for developing and using a cost linear function except:

Accepted Answer

A) Past costs rarely need updating to be good predictors of future costs 
B) Operations are within the relevant range 
C) Variable costs remain constant within the relevant range 
D) Fixed costs remain fixed within the relevant range 
A) Past costs rarely need updating to be good predictors of future costs 
B) Operations are within the relevant range 
C) Variable costs remain constant within the relevant range 
D) Fixed costs remain fixed within the relevant range

Question 3

You work for a company that manufactures computer chips. You need to develop a cost function for maintenance cost, which consists of the cost for routine maintenance and repair of machines used to manufacture the chips.
a)List the steps you would take to develop a cost function for predicting next year's maintenance cost. The maintenance department head has suggested these three possible cost drivers: machine setups, labour hours, or machine hours. Include a detailed explanation of how you would determine the best cost driver among these three.
b)You have developed the cost function and used it to develop part of next year's budget. During the first few months of the year, you find that the estimate is off by several thousand dollars. Provide reasons why this could occur.

Accepted Answer

a)To develop a cost function, I first co

Question 4

The major disadvantage of the high-low method is that:

Accepted Answer

A) It uses the two most extreme data points in determining a cost function 
B) It is difficult to calculate 
C) It is difficult to understand 
D) It involves more judgmental factors than do other methods 
A) It uses the two most extreme data points in determining a cost function 
B) It is difficult to calculate 
C) It is difficult to understand 
D) It involves more judgmental factors than do other methods

Question 5

A p-value of 89% for the slope coefficient in a regression of a cost driver against a cost indicates:

Accepted Answer

A) The true variable costs are statistically significantly different from zero 
B) There is only an 11% chance the true variable costs are zero 
C) The relationship between the cost and the cost driver is nonlinear 
D) None of the above 
A) The true variable costs are statistically significantly different from zero 
B) There is only an 11% chance the true variable costs are zero 
C) The relationship between the cost and the cost driver is nonlinear 
D) None of the above

Question 6

If we want to estimate the cost of lumber for manufacturing chairs, the cost function most likely reflects:

Accepted Answer

A) Only a variable cost 
B) Only a fixed cost 
C) A mixed cost 
D) An irrelevant cost 
A) Only a variable cost 
B) Only a fixed cost 
C) A mixed cost 
D) An irrelevant cost

Question 7

Regression analysis works best when the relationship between costs and cost drivers is:

Accepted Answer

A) Positive and linear 
B) Linear and direct 
C) Positive and indirect 
D) Positive, linear, and indirect 
A) Positive and linear 
B) Linear and direct 
C) Positive and indirect 
D) Positive, linear, and indirect

Question 8

A firm has the capacity to produce 3,100 units per week. At 80% capacity, the average total cost per unit is $12.50 and the average variable cost per unit is $7.50. What is the total fixed cost per week, assuming the firm is still operating within its relevant range?

Accepted Answer

A) $10,400 
B) $14,400 
C) $ 8,400 
D) $12,400 
A) $10,400 
B) $14,400 
C) $ 8,400 
D) $12,400

Question 9

Explain how scatter plots are used in the process of developing cost functions.

Accepted Answer

A scatter plot is used to increase under

Question 10

List the assumptions made when a linear cost function is developed.

Accepted Answer

Assumptions:
Fixed costs remai

Question 11

Which graph shows data that are more suitable for regression analysis?

Accepted Answer

A) Graph A 
B) Graph B 
C) Neither Graph A nor Graph B 
D) Cannot be determined 
A) Graph A 
B) Graph B 
C) Neither Graph A nor Graph B 
D) Cannot be determined

Question 12

Which of the following is not an assumption when estimating a cost function over the relevant range of activity?

Accepted Answer

A) Mixed costs will change in total 
B) Mixed costs will change per unit 
C) Variable costs will be constant in total 
D) Fixed costs will be constant in total. 
A) Mixed costs will change in total 
B) Mixed costs will change per unit 
C) Variable costs will be constant in total 
D) Fixed costs will be constant in total.

Question 13

The relevant range is defined as:

Accepted Answer

A) The period of time over which costs do not change 
B) The volume of production over which the cost assumptions hold 
C) The volume of production over which step-wise fixed costs increase 
D) The time period in which the level of production does not change 
A) The period of time over which costs do not change 
B) The volume of production over which the cost assumptions hold 
C) The volume of production over which step-wise fixed costs increase 
D) The time period in which the level of production does not change

Question 14

In a regression equation, variable costs are represented by the:

Accepted Answer

A) Slope 
B) Intercept 
C) Adjusted R-square coefficient 
D) t-statistic 
A) Slope 
B) Intercept 
C) Adjusted R-square coefficient 
D) t-statistic

Question 15

List one assumption made when a linear cost function is developed and describe a circumstance in which that assumption would not hold.

Accepted Answer

Students are asked to list only one assu

Question 16

The trend line from a scatter plot can be used to identify data points for:

Accepted Answer

A) The two-point method 
B) Analysis at the account level 
C) Engineered estimate of cost 
D) Regression analysis 
A) The two-point method 
B) Analysis at the account level 
C) Engineered estimate of cost 
D) Regression analysis

Question 17

Managers should be trained in engineering to calculate an engineered cost estimate.

Accepted Answer

A) True 
 B)False

Question 18

Jackie's Kennels is located in a small city in Western Canada. The company employs three pet attendants, four pet groomers, and two front office staff who book appointments and keep records. The Kennel provides a range of services for dogs and cats including boarding, grooming, and obedience training. The grooming area includes a small retail section that carries dog and cat food, pet supplies, and toys. Which of the following is a sunk cost for any cost object related to Jackie's Kennels?

Accepted Answer

A) Cost of the automobile Jackie is planning to buy for pet transportation 
B) Cost of existing computer equipment used to keep company records 
C) Cost of annual wages for full-time employees 
D) Cost of rent for the next period 
A) Cost of the automobile Jackie is planning to buy for pet transportation 
B) Cost of existing computer equipment used to keep company records 
C) Cost of annual wages for full-time employees 
D) Cost of rent for the next period

Question 19

Which of the following is the most valid criticism of the high-low method?

Accepted Answer

A) It never produces accurate results 
B) It is mathematically too complex for most managers to comprehend 
C) It is a specialized case of the two-point method 
D) Data points might be outside the normal range of activity 
A) It never produces accurate results 
B) It is mathematically too complex for most managers to comprehend 
C) It is a specialized case of the two-point method 
D) Data points might be outside the normal range of activity

Question 20

The learning curve refers to declines in the cost of materials as production volume increases.

Accepted Answer

A) True 
 B)False

When the cost object is a unit produced, straight-line depreciation on manufacturing equipment would be a: Variable Cost Fixed Cost Direct Cost

All of the following are assumptions for developing and using a cost linear function except:

The major disadvantage of the high-low method is that:

A p-value of 89% for the slope coefficient in a regression of a cost driver against a cost indicates:

If we want to estimate the cost of lumber for manufacturing chairs, the cost function most likely reflects:

Regression analysis works best when the relationship between costs and cost drivers is:

A firm has the capacity to produce 3,100 units per week. At 80% capacity, the average total cost per unit is $12.50 and the average variable cost per unit is $7.50. What is the total fixed cost per week, assuming the firm is still operating within its relevant range?

Explain how scatter plots are used in the process of developing cost functions.

List the assumptions made when a linear cost function is developed.

Which graph shows data that are more suitable for regression analysis?

Which of the following is not an assumption when estimating a cost function over the relevant range of activity?

The relevant range is defined as:

In a regression equation, variable costs are represented by the:

List one assumption made when a linear cost function is developed and describe a circumstance in which that assumption would not hold.

The trend line from a scatter plot can be used to identify data points for:

Managers should be trained in engineering to calculate an engineered cost estimate.

Which of the following is the most valid criticism of the high-low method?

The learning curve refers to declines in the cost of materials as production volume increases.

The Role of Ethical Accounting Information in Management Decision Making

Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Strategic Performance Measurement

Sustainability Management

Filters

Exam 2: Cost Concepts, Behaviour, and Estimation

When the cost object is a unit produced, straight-line depreciation on manufacturing equipment would be a: Variable Cost Fixed Cost Direct Cost

All of the following are assumptions for developing and using a cost linear function except:

The major disadvantage of the high-low method is that:

A p-value of 89% for the slope coefficient in a regression of a cost driver against a cost indicates:

If we want to estimate the cost of lumber for manufacturing chairs, the cost function most likely reflects:

Regression analysis works best when the relationship between costs and cost drivers is:

A firm has the capacity to produce 3,100 units per week. At 80% capacity, the average total cost per unit is $12.50 and the average variable cost per unit is $7.50. What is the total fixed cost per week, assuming the firm is still operating within its relevant range?

Explain how scatter plots are used in the process of developing cost functions.

List the assumptions made when a linear cost function is developed.

Which graph shows data that are more suitable for regression analysis?

Which of the following is not an assumption when estimating a cost function over the relevant range of activity?

The relevant range is defined as:

In a regression equation, variable costs are represented by the:

List one assumption made when a linear cost function is developed and describe a circumstance in which that assumption would not hold.

The trend line from a scatter plot can be used to identify data points for:

Managers should be trained in engineering to calculate an engineered cost estimate.

Which of the following is the most valid criticism of the high-low method?

The learning curve refers to declines in the cost of materials as production volume increases.

The Role of Ethical Accounting Information in Management Decision Making

Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Strategic Management of Costs

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

Strategic Performance Measurement

Sustainability Management

Filters