Exam 5: Cost Drivers and Cost Behavior

Narrative 5-1 The following question(s)refer to the this equation analyzing the relationship of total cost to changes in machine hours.The following relationship was determined: TC = $2,200 + $3X Refer to Narrative 5-1.The independent variable is which of the following?

Analysts often comment that

What are selling,general and administrative costs considered "sticky?"

Universal Distributors Universal Distributors,a major retailing and mail order operation,has been in business for the past 10 years.During that time,the mail order operations have grown from a sideline to represent over 80% of the company's annual sales.Of course,the company has suffered growing pains.There were times when overloaded or faulty computer programs resulted in lost sales,and the scheduling of temporary workers to augment the permanent staff during peak periods has always been a problem. Peter Ben Ezra,manager of mail order operations,has developed procedures for handling most problems.However,he is still trying to improve the scheduling of temporary workers to take telephone orders from customers.Under the current system,he keeps a permanent staff of 60 employees who handle the basics;the number of temporary workers needed for the next day is determined by Ben Ezra each afternoon based on his estimate of the upcoming telephone volume. Mr.Ben Ezra has decided to try regression analysis as a way to improve the hiring of temporary workers.By summarizing the daily labor hours into weekly totals for the past year,Ben Ezra was able to determine the number of workers that were used each week.In addition,he listed the number of orders that had been processed each week.After entering the data into a spreadsheet,Ben Ezra ran two regressions.Regression #1 related the total workers (permanent staff plus temporary workers)to the number of orders received,and Regression #2 related only temporary workers to the number of orders received.The output of these analyses is presented below. Regression Equation: W = a + bT Where: W = Workers T = Telephone Orders Refer to Universal Distributors.Which one of the two regression analyses appears to be better? Explain your answer.

Carson Company's market for the Model A has changed significantly,and Carson has had to drop the price per unit from $265 to $125.There are some units in the work in process inventory that have costs of $150 per unit associated with them.Carson could sell these units in their current state for $100 each.It will cost Carson $10 per unit to complete these units so that they can be sold for $125 each. When the incremental revenues and expenses are analyzed,the company is better off by:

Which of the following is a strength of the engineering method of cost estimation?

Which statement is true concerning curvilinear variable cost functions?

To simplify the analysis of cost behavior,decision makers usually assume that costs are either

Research,development,and advertising to generate new business are examples of which of the following costs?

Universal Distributors Universal Distributors,a major retailing and mail order operation,has been in business for the past 10 years.During that time,the mail order operations have grown from a sideline to represent over 80% of the company's annual sales.Of course,the company has suffered growing pains.There were times when overloaded or faulty computer programs resulted in lost sales,and the scheduling of temporary workers to augment the permanent staff during peak periods has always been a problem. Peter Ben Ezra,manager of mail order operations,has developed procedures for handling most problems.However,he is still trying to improve the scheduling of temporary workers to take telephone orders from customers.Under the current system,he keeps a permanent staff of 60 employees who handle the basics;the number of temporary workers needed for the next day is determined by Ben Ezra each afternoon based on his estimate of the upcoming telephone volume. Mr.Ben Ezra has decided to try regression analysis as a way to improve the hiring of temporary workers.By summarizing the daily labor hours into weekly totals for the past year,Ben Ezra was able to determine the number of workers that were used each week.In addition,he listed the number of orders that had been processed each week.After entering the data into a spreadsheet,Ben Ezra ran two regressions.Regression #1 related the total workers (permanent staff plus temporary workers)to the number of orders received,and Regression #2 related only temporary workers to the number of orders received.The output of these analyses is presented below. Regression Equation: W = a + bT Where: W = Workers T = Telephone Orders

Data from the duplicating department of Easton Company for the last nine months are as follows: Review the actual data and the regression output above.Do you think the data could be improved by removing any outliers? If so,identify likely outliers from the data given and state reasons why you would remove them.Would removing these data points change the regression output? How? Give reasons for the change and direction the values may move.Give reasons why you might want to leave the data as is.

Total costs that vary with activity levels in the short run are known as:

The major purpose of cost estimation is to break down total cost into which of the following components?

If all the data points were on a line,the r-square would be