Deck 8: Cost Estimation

Question 1

Felinas Inc.produces floor mats for cars and trucks.The owner,Kenneth Felinas,asked you to assist him in estimating his maintenance costs.Together,Mr.Felinas and you determined that the single best cost driver for maintenance costs was machine hours.Below are data from the previous fiscal year for maintenance expense and machine hours:
Using the high-low method,unit variable cost is calculated to be:

A)$1.31.
B)$1.59.
C)$1.36.
D)$1.14.
E)$1.20.

Answer 1

E

Question 2

An R-squared value that approaches one (1.0)would indicate:

A)An average degree of explanatory power.
B)A low degree of explanatory power.
C)A high degree of explanatory power.
D)The presence of outliers.
E)The absence of outliers.

Answer 2

C

Question 3

High-low and regression cost estimation methods are alike in that they both:

A)Have an intercept term and a slope term.
B)Have an intercept term but not a slope term.
C)Have a slope term but not an intercept term.
D)Use all data points.
E)Use only a few selected data points.

Answer 3

A

Question 4

Regression analysis is better than the high-low method of cost estimation because regression analysis:

A)Is mathematical.
B)Can provide greater precision and reliability.
C)Fits its data into a mathematical equation.
D)Takes less time.
E)Is a statistical method.

Question 5

The objective of the fourth step in cost estimation,graphing the data,is intended to:

A)Identify unusual patterns.
B)Show data in two dimensions.
C)Enhance the cost estimation process.
D)Allow for subjectivity in cost estimation.

Question 6

Which of the four types of cost drivers - activity-based,volume-based,structural and executional - are often best related to linear cost estimation methods?

A)Activity-based only.
B)Activity-based and volume-based.
C)Structural and volume-based.
D)Executional and volume-based.
E)Structural and executional.

Question 7

A variable used in regression analysis that represents the presence or absence of a condition,e.g. ,seasonality,is called a (n):

A)Random variable.
B)Dummy variable.
C)Extraneous variable.
D)Correlating variable.
E)Redundant variable.

Question 8

Which one of the following cost estimation methods is the most accurate?

A)Regression analysis.
B)Visual fit.
C)Subjective forecasting.
D)The high-low method.

Question 9

The independent variable in regression analysis is:

A)The cost to be estimated.
B)The cost driver used to estimate the value of the dependent variable.
C)Hard to define because of its independence.
D)Usually expressed as a range of values.
E)Not always necessary to perform regression analysis.

Question 10

Selection and employment of the correct estimation method is:

A)Easy once the data is gathered.
B)Relatively easy because only two effective methods exist.
C)Dependent on the precision/cost tradeoff for the estimation objectives.
D)Primarily subjective in nature.
E)Difficult because so many effective methods are available.

Question 11

Which of the following five steps (out of six)of cost estimation is out of order?

A)Step 1: Define the cost object to be estimated.
B)Step 2: Determine the cost driver(s).
C)Step 3: Collect relevant data on the cost of the cost object and the cost driver.
D)Step 4: Evaluate the accuracy of the cost estimate.
E)Step 5: Graph the data.

Question 12

The identification of cost drivers is perhaps the most important step in developing the cost estimate because:

A)It is the first step in cost estimation.
B)It is the final step in cost estimation.
C)There may be a number of relevant drivers;some not immediately obvious.
D)The other steps are easier to execute.
E)It requires much more time than the other steps.

Question 13

A data point that is outside the normal distribution of data,called an "outlier," is often removed from the data set before analysis because it:

A)Is obviously due to an inaccuracy in the calculations.
B)Can distort the results of the data analysis.
C)Has an upward bias on the statistical measures in regression.
D)Will always add bias to the results of a high-low analysis.

Question 14

Which one the following is a variable that takes on values of 1,2,3, for each period in sequence?

A)Dummy variable.
B)Outlier.
C)Trend variable.
D)Dependent variable.
E)Independent variable.

Question 15

Technology and complexity issues often lead management to simplify and to:

A)Use linear estimation methods.
B)Use volume-based costing and nonlinear estimation methods.
C)Use volume-based costing methods.
D)Use nonlinear estimation methods.
E)Use activity-based costing and volume-based costing methods.

Question 16

In least squares regression analysis,the cost to be estimated is the:

A)Independent variable.
B)Dependent variable.
C)Cost object.
D)Outlier.
E)Dummy variable.

Question 17

The learning curve in cost estimation is a good example of:

A)Non-linear cost behavior.
B)Machine-intensive production.
C)Simple regression.
D)A random variable.
E)Efficient labor.

Question 18

When there are two or more cost drivers,regression is termed:

A)Simple.
B)Binary.
C)Multiple.
D)Curvilinear.
E)Synergistic.

Question 19

Extending the length of a time period in regression cost analysis and prediction will result in:

A)Fewer recording lags or cut-off errors.
B)Confounding data.
C)Increasing the explanatory power of the data.
D)Better results because more data is being used.
E)More recording lags or cut-off errors.

Question 20

Data collected on the cost objects and cost drivers for cost estimation must be:

A)Brief and limited.
B)Exhaustive.
C)Concrete.
D)Consistent and accurate.
E)Varied.

Question 21

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures: Highest and Lowest: Cost per month $42,000and $34,000;Machine hours 46,000 and 30,000.Using the high-low method,the estimated variable cost per machine hour is:

A)$0.70
B)$0.60
C)$0.50
D)$0.90
E)$0.10

Question 22

Home Remodeling Inc.recently obtained a short-term bank loan from City National Bank.The bank required that certain credit information and pro forma financial statements be maintained through the life of the loan.In order to prepare the pro forma statements,Home Remodeling must forecast total overhead cost.The actual machine hours and overhead cost are presented below for the past six months.
Using the high-low method,unit variable overhead cost is calculated to be:

A)$2.49.
B)$3.40.
C)$2.06.
D)$2.60.
E)$2.00.

Question 23

Burmer Co.has accumulated data to use in preparing its annual profit plan for the upcoming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff suggested that linear regression be employed to derive an equation for maintenance hours and costs.Data regarding the maintenance hours and costs for the last year and the results of the regression analysis are as follows:
Average cost per hour ($51,830 / 6,260)= $8.28 (rounded to the nearest cent)r = .99821;r 2= .99642.
The percent of the total variance that can be explained by the regression equation is:

A)99.821%.
B)69.670%
C)81.049%
D)99.780%.
E)99.642%.

Question 24

The following costs were for Optimal View Inc. ,a contact lens manufacturer:
At an output level of 425 lenses,per unit variable cost is calculated to be:

A)$34.29.
B)$48.00.
C)$30.00.
D)$35.56.
E)$40.00.

Question 25

The following costs were for Optimal View Inc. ,a contact lens manufacturer:
At an output level of 500 lenses,per unit total cost is projected to be:

A)$45.85.
B)$56.67.
C)$39.45.
D)$50.40.
E)$48.56.

Question 26

CalcuCo hired Effner & Associates to design a new computer-aided manufacturing facility.The new facility was designed to produce 300 computers per month.The variable costs for each computer are $660 and the fixed costs total $74,700 per month.The average cost per unit,if the facility normally expects to operate at eighty-five percent of capacity,is calculated to be (round to nearest cent):

A)$952.94.
B)$909.00.
C)$936.67.
D)$971.25.
E)$942.47.

Question 27

Burmer Co.has accumulated data to use in preparing its annual profit plan for the upcoming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff suggested that linear regression be employed to derive an equation for maintenance hours and costs.Data regarding the maintenance hours and costs for the last year and the results of the regression analysis are as follows:
Average cost per hour ($51,830 / 6,260)= $8.28 (rounded to the nearest cent)r = .99821;r²= .99642.
Using the high-low method,unit variable cost is calculated to be (round to the nearest cent):

A)$6.83.
B)$8.67.
C)$6.78.
D)$7.88.
E)$6.48.

Question 28

Nellibell's Café bakes croissants that are sold to local restaurants and grocery stores in the Columbia,South Carolina area.When 600 croissants are baked,the average cost is $0.70.When 720 croissants are baked,the average cost is $0.65.What is the total cost when 670 croissants are baked?

A)$568.
B)$588.
C)$448.
D)$532.
E)$500.

Question 29

Thompson Refrigerators Inc.needs to prepare pro forma financial statements for the next fiscal year.To do so,the company must forecast its total overhead cost.The actual machine hours and total overhead cost are presented below for the past six months.
Using the high-low method,unit variable overhead cost is calculated to be:

A)$1.35.
B)$1.15
C)$1.40.
D)$1.65.
E)$1.25.

Question 30

Thompson Refrigerators Inc.needs to prepare pro forma financial statements for the next fiscal year.To do so,the company must forecast its total overhead cost.The actual machine hours and total overhead cost are presented below for the past six months.
Using the high-low method,total monthly fixed overhead cost is calculated to be:

A)$5,326.10
B)$5,462.80
C)$5,661.90
D)$5,890.30
E)$5,972.40

Question 31

Burmer Co.has accumulated data to use in preparing its annual profit plan for the upcoming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff suggested that linear regression be employed to derive an equation for maintenance hours and costs.Data regarding the maintenance hours and costs for the last year and the results of the regression analysis are as follows:
Average cost per hour ($51,830 / 6,260)= $8.28 (rounded to the nearest cent)r = .99821;r²= .99642.
Using the high-low method,total maintenance cost for 600 hours is calculated to be (rounded):

A)$5,293.
B)$4,814.
C)$5,528.
D)$4,913.
E)$5,106.

Question 32

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures: Highest and Lowest: Cost per month $86,000 and $74,000;Machine hours 96,000 and 66,000.
Using the high-low-point method of analysis,the estimated variable cost per machine hour is:

A)$0.40
B)$0.20
C)$0.90
D)$0.10
E)$0.70

Question 33

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures: Highest and Lowest: Cost per month $42,000and $34,000;Machine hours 46,000 and 30,000.Using the high-low technique,estimate the annual fixed cost for maintenance expenditures:

A)$447,000.
B)$240,000.
C)$230,000.
D)$384,000.
E)$228,000

Question 34

Audio Zone Co.needs to prepare pro forma financial statements for the next fiscal year.To do so,the company must forecast its total overhead cost.The actual machine hours and total overhead cost are presented below for the past six months.
Using the high-low method,total monthly fixed overhead cost is calculated to be:

A)$2,626.
B)$2,698.
C)$2,512.
D)$2,590.
E)$2,722.

Question 35

Jennerson Co.produced a pilot run of sixty units of a recently developed piston used in the finished products.The piston has a one-year life,and Jennerson expected to produce and sell 1,960 units annually.The pilot run required an average of.34 direct labor hours per piston for 60 pistons.The last piston in the pilot run required.23 direct labor hours.Jennerson experienced an eighty percent learning curve on the direct labor hours needed to produce new pistons.Past experience indicated that learning tends to cease by the time 960 parts are produced.Jennerson's manufacturing costs for pistons are presented below.
Jennerson received a quote of $9 per unit from Kytel Machine Co.for the additional 1,900 needed pistons.Jennerson frequently subcontracts this type of work and has always been satisfied with the quality of the units produced by Kytel.If the pistons are manufactured by Jennerson Co. ,the total direct labor hours for the first 960 pistons (including the pilot run)produced is calculated to be:

A)167.11.
B)133.69
C)106.95.
D)125.33.
E)142.04.

Question 36

Home Remodeling Inc.recently obtained a short-term bank loan from City National Bank.The bank required that certain credit information and pro forma financial statements be maintained through the life of the loan.In order to prepare the pro forma statements,Home Remodeling must forecast total overhead cost.The actual machine hours and overhead cost are presented below for the past six months.
Using the high-low method,total monthly fixed overhead cost is calculated to be:

A)$626.
B)$696.
C)$612.
D)$690.
E)$722.

Question 37

Felinas Inc.produces floor mats for cars and trucks.The owner,Kenneth Felinas,asked you to assist him in estimating his maintenance costs.Together,Mr.Felinas and you determined that the single best cost driver for maintenance costs was machine hours.Below are data from the previous fiscal year for maintenance expense and machine hours:
Using the high-low method,total monthly fixed cost is calculated to be:

A)$484.
B)$364.
C)$752.
D)$259.
E)$898.

Question 38

Audio Zone Co.needs to prepare pro forma financial statements for the next fiscal year.To do so,the company must forecast its total overhead cost.The actual machine hours and total overhead cost are presented below for the past six months.
Using the high-low method,unit variable overhead cost is calculated to be:

A)$1.40
B)$1.50
C)$1.60
D)$1.80
E)$1.90

Question 39

Burmer Co.has accumulated data to use in preparing its annual profit plan for the upcoming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff suggested that linear regression be employed to derive an equation for maintenance hours and costs.Data regarding the maintenance hours and costs for the last year and the results of the regression analysis are as follows:
Average cost per hour ($51,830 / 6,260)= $8.28 (rounded to the nearest cent)r = .99821 r²= .99642
Using the high-low method,total monthly fixed cost is calculated to be (rounded):

A)$757.
B)$854.
C)$752.
D)$784.
E)$716.

Question 40

Jennerson Co.produced a pilot run of sixty units of a recently developed piston used in the finished products.The piston has a one-year life,and Jennerson expected to produce and sell 1,960 units annually.The pilot run required an average of.34 direct labor hours per piston for 60 pistons.The last piston in the pilot run required.23 direct labor hours.Jennerson experienced an eighty percent learning curve on the direct labor hours needed to produce new pistons.Past experience indicated that learning tends to cease by the time 960 parts are produced.Jennerson's manufacturing costs for pistons are presented below.
Jennerson received a quote of $9 per unit from Kytel Machine Co.for the additional 1,900 needed pistons.Jennerson frequently subcontracts this type of work and has always been satisfied with the quality of the units produced by Kytel.If the pistons are manufactured by Jennerson Co. ,the average direct labor hours per unit for the first 960 pistons (including the pilot run)produced is calculated to be:

A)0.13926.
B)0.1728.
C)0.11141.
D)0.13056.
E)0.14797.

Question 41

Multiple regression analysis:

A)Establishes a cause and effect relationship.
B)Does not produce measures of probable error.
C)Measures the change in one variable associated with the change in one other variable only.
D)Measures the change in one variable associated with the change in more than one other variable.

Question 42

Simple regression analysis involves the use of:

A)A
B)B
C)C
D)D

Question 43

A manager uses regression to express sales as a function of advertising expenditures (X₁),and per capita income (X₂)in your sales area.The following multiple linear regression equation is developed: Y = 10 + .51X₁ + .45X_2. The coefficient of determination is.96.Determine which of the following conclusions is valid regarding the coefficient of determination:

A)More analysis is needed.The coefficient of determination leaves much unexplained.
B)The regression line fits the data used in the sample very well.There is a strong indication of the relationship of the two variables with sales.
C)The coefficient of determination is positive because the constant term is positive.
D)The coefficient of determination should always be greater than one.

Question 44

A company using regression analysis to correlate income to a variety of sales indicators found that the relationship between the number of sales managers in a territory and net income for the territory had a correlation coefficient of -1.Which is the best description of this situation?

A)More sales managers should be hired.
B)Imperfect negative correlation.
C)Perfect inverse correlation.
D)There is no correlation at all.

Question 45

As a preliminary step in the selection of variables to use in a statistical-forecasting model,the management accountant has calculated the coefficient of correlation between the firm's sales and three economic indexes.The results were as follows:
Which of the following statements indicates the best course of action for the auditor to take in the development of a forecasting model?

A)Drop all three indexes from further consideration because a coefficient of correlation of + 1.0 is necessary for a statistically significant relationship.
B)Include only indexes B and C in the model because they have the only negative coefficients of correlation.
C)Include only index C in the model because its coefficient of correlation is relatively high and therefore probably statistically significant,while the coefficients of indexes A and B are likely to be insignificant.
D)Include only index A in the model because it has the only positive coefficient of correlation.

Question 46

Questions 44 and 45 are based on the maintenance expenses of a company,which are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures:
Using the high-low technique,estimate the annual fixed cost for maintenance expenditures:

A)$447,360.
B)$240,000.
C)$230,400.
D)$384,000.
Fixed cost = ($39,200 x 12 months)- (24,000 x 12x $0.80)= $240,000

Question 47

A company allocates its variable factory overhead based on direct labor hours.During the past three months,the actual direct labor hours and the total factory overhead allocated were as follows:
Based upon this information,monthly fixed factory overhead was:

A)$30,000.
B)$50,000.
C)$46,667.
D)$33,333.
Using January and March: Unit variable cost = ($200,000 - $80,000)/(5,000 - 1,000)= $30 Fixed cost = $200,000 - (5,000 x $30)= $50,000.= $80,000 - (1,000 x $30)= $50,000

Question 48

For a simple regression analysis model that is used to allocate factory overhead,an internal auditor finds that the intersection of the line of best fit for the overhead allocation with the y-axis is $5,000.The slope of the line is.20.The independent variable,factory wages,amounts to $900,000 for the month.What is the estimated amount of factory overhead to be allocated for the month?

A)$65,000.
B)$180,000.
C)$230,000.
D)$92,500.
E)$185,000.

Question 49

Jackson,Inc.is preparing a budget for the coming year and requires a breakdown of the cost of electrical power used in its factory into the fixed and variable elements.The following data on the cost of power used and direct labor hours worked are available for the last six months of this year:
Assuming that Jackson uses the high-low method of analysis,the estimated variable cost of steam per direct labor hour is:

A)$4.00.
B)$5.42.
C)$5.82.
D)$6.00.
= Unit variable cost = ($19,800 - $13,400)/(3,650 - 2,050)= $4.00

Question 50

This question is based on analyzing the relationship of total factory overhead (Y)to direct labor hours (X).The following relationship was found: Y = $1,000 + $2X.This relationship is:

A)Parabolic.
B)Curvilinear.
C)Linear.
D)Probabilistic.

Question 51

The use of a relationship of total factory overhead to direct labor hours is said to be valid only within the relevant range,which means:

A)Within a reasonable dollar amount for labor costs.
B)Within the range of observations of the cost driver.
C)Within the range of reasonableness as judged by the department supervisor.
D)Within the budget allowance for overhead.

Question 52

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures:
Using the high-low-point method of analysis,the estimated variable cost per machine hour is:

A)$1.25.
B)$12.50.
C)$0.80.
D)$0.08.
Unit variable cost = ($39,200 - $32,000)/(24,000 - 15,000)= $0.80

Question 53

This question is based on analyzing the relationship of total factory overhead (Y)to direct labor hours (X).The following relationship was found: Y = $1,000 + $2X.The variable Y in the equation is an estimate of:

A)Total variable costs.
B)Total factory overhead.
C)Total fixed costs.
D)Total direct labor hours.

Question 54

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures: Highest and Lowest: Cost per month $20,000 and $14,000;Machine hours 55,000 and 35,000.
Using the high-low technique,estimate the annual fixed cost for maintenance expenditures:

A)$42,000.
B)$40,000.
C)$30,000.
D)$44,000.
E)$38,000

Question 55

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures: Highest and Lowest: Cost per month $20,000 and $14,000;Machine hours 55,000 and 35,000.
Using the high-low-point method of analysis,the estimated variable cost per machine hour is:

A)$0.40
B)$0.25
C)$0.30
D)$0.35
E)$0.70

Question 56

This question is based on analyzing the relationship of total factory overhead (Y)to direct labor hours (X).The following relationship was found: Y = $1,000 + $2X.This equation was probably found through the use of which of the following mathematical techniques?

A)Linear programming.
B)Multiple regression analysis.
C)Simple regression analysis.
D)Excel tools.
E)Nonlinear regression.

Question 57

This question is based on analyzing the relationship of total factory overhead (Y)to direct labor hours (X).The following relationship was found: Y = $1,000 + $2X.The $2 in the equation is an estimate of:

A)Total fixed costs.
B)Variable overhead costs per direct labor hour.
C)Total overhead costs.
D)Fixed overhead costs per direct labor hour.

Question 58

A retailer,in business for over 50 years,has developed the following regression model from the past 60 months of operating data: Monthly sales dollars = $50,000 + $4.70A + $30B - $1,000X.Where A = number of customers.B = advertising dollars per month.X = 1 if a winter month.X = 0 if other months.An appropriate interpretation of this model is that:

A)The business is seasonal,generating higher sales in winter months than other months.
B)Advertising is not cost effective.
C)Within the relevant range,each additional customer will make a monthly purchase of $4.70 on average.
D)Sales are always expected to be at least $50,000.

Question 59

The maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget.Examination of past records disclosed the following costs and volume measures: Highest and Lowest: Cost per month $86,000 and $74,000;Machine hours 96,000 and 66,000.
Using the high-low technique,estimate the annual fixed cost for maintenance expenditures.

A)$447,400.
B)$368,800.
C)$532,900.
D)$571,200.
E)$218,700.

Question 60

A manager uses regression to express sales as a function of advertising expenditures (X₁),and per capita income (X₂)in your sales area.The following multiple linear regression equation is developed: Y = 10 + .51X₁ + .45X_2. The coefficient of determination is .96.This coefficient of determination explains that:

A)96% of sales variations are due to an error term.
B)The dependent variable is not related to advertising expenditures and per capita income.
C)96% of sales variations are explained by the equation.
D)Only 4% of the sales variations are explained by advertising expenditures and per capital income.

Question 61

Which of the following is required for multiple regression?

A)The use of dummy variables.
B)The use of more than one cost driver.
C)The use of more than one dependent variable.
D)The use of a trend variable.

Question 62

The standard error of the estimate (SE)in a regression analysis is:

A)A measure indicating the amount of a data falling within the relevant range.
B)A measure of explanatory power which is a number between zero and 1.
C)A measure of the accuracy of the regression's estimates.
D)A measure of reliability of each independent variable.

Question 63

Which of the following is not one of the main issues regarding data collection which can significantly affect precision and reliability when using regression or any other cost estimation method?

A)Data accuracy.
B)Time period choice.
C)Nonlinearity.
D)Linearity.

Question 64

If the coefficient of correlation between two variables is zero,how might a scatter diagram of these variables appear?

A)Random points.
B)A least squares line that slopes up to the right.
C)A least squares line that slopes down to the right.
D)Under this condition,a scatter diagram could not be plotted on a graph.

Question 65

Sterling Glass Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
How should the cost function be properly stated?

A)Y = $2,025 + $2.50H.
B)Y = $3,890 + $2.00H.
C)Y = $4,085 + $2.00H.
D)Y = $5,260 + $2.50H.
Unit variable cost = ($5,685 - $4,485)/(800 - 200)= $2.00.Fixed cost = $5,685 - (800 x $2.00)= $4,085 or $4,485 - (200 x $2.00)= $4,085

Question 66

Sterling Glass Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
What is the estimated total cost at an operating level of 150 hours?

A)$4,385.00.
B)$4,785.20.
C)$4,185.65.
D)$4,875.00.
TC = $4,085 + ($2.00 x 150)= $4,385

Question 67

A range around the regression line within which the management accountant can rely that the actual value of the predicted cost will fall is referred to as:

A)A relevant range.
B)A goodness of fit.
C)A confidence interval.
D)An F-statistic.
E)Degrees of freedom.

Question 68

Microdash Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
What is the estimated total cost at an operating level of 8,000 hours?

A)$9,500.
B)$9,835.
C)$10,135.
D)$10,075.
Total cost = $875 + (8,000 x $1.15)= $10,075

Question 69

Cost estimation includes all of the following steps except:

A)Defining the cost object for which the related costs are to be estimated.
B)Determining the cost drivers.
C)Graphing the data.
D)Selecting and employing the appropriate estimation method.
E)Calculating the multiple regression coefficient.

Question 70

The R-squared in a satisfactory regression should be:

A)greater than .5
B)greater than .6
C)greater than .75
D)greater than .9

Question 71

Sterling Glass Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
What is the estimated total cost at an operating level of 900 hours?

A)$5,275.
B)$5,745.
C)$5,115.
D)$5,885.
Total cost = $4,085 + ($2.00 x 900)= $5,885

Question 72

Which of the following cannot be influenced by learning curve analysis?

A)Make-or-buy decisions.
B)Cost-volume-profit analysis.
C)Capital budgeting.
D)Development of standard product costs.
E)Theory of constraints.

Question 73

Microdash Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
How should the cost function be properly stated?

A)Y = $1,025 + $1.24H.
B)Y = $875 + $1.15H.
C)Y = $8,542 + $0.145H.
D)Y = $9,263 + $0.162H.
Using March and May.Unit variable cost = ($9,500 - $7,200)/(7,500 - 5,500)= $1.15.Fixed cost = $9,500 - (7,500 x $1.15)= $875.= $7,200 - (5,500 x $1.15)= $875

Question 74

The p-value measures:

A)The probability that the regression equation is reliable.
B)The statistical significance of the dependent variable.
C)The risk that a particular independent variable has only a chance relationship to the dependent variable.
D)The confidence range around the regression prediction.

Question 75

Condor Airplane Company has built a new model jet aircraft which it intends to sell to high net worth clients.This aircraft required 25,000 hours to complete.Condor believes an incremental unit-time learning model with an 82% learning curve best reflects the company's production efficiency.Condor just received a contract to make seven identical aircraft.What will be the expected unit time for the eighth aircraft?

A)20,500.00.
B)16,810.00.
C)13,784.20.
D)11,303.04.
T x Lⁿ = time required for the nth time the task is done.T = 25,000 hours;L = 82%;n = # of times the task is doubled = 3.25,000 x 0.82³ = 13,784.20

Question 76

Which of these job characteristics would result in the learning curve having less of an effect?

A)Repetitive tasks.
B)Working on an assembly line.
C)Use of robotics and computer-aided manufacturing.
D)Activities where teaching and learning take place.

Question 77

Pearson Electric Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
How should the cost function be properly stated?

A)Y = $6,025 + $2.00H.
B)Y = $6,520 + $3.00H.
C)Y = $6,085 + $2.00H.
D)Y = $6,250 + $3.00H.
Unit variable cost = ($9,460 - $7,300)/(980 - 260)= $3.00.Fixed cost = $9,460 - (980 x $3.00)= $6,520 or $7,300 - (260 x $3.00)= $6,520

Question 78

Place the six cost estimation steps into the correct order:
1)Determine the cost drivers
2)Graph the data
3)Select and employ the appropriate estimation method
4)Define the cost object for which the related costs are to be estimated
5)Evaluate the accuracy of the cost estimate
6)Collect consistent and accurate data on the cost object and the cost drivers

A)6,4,1,3,5,2.
B)4,1,6,2,3,5.
C)2,1,4,3,6,5.
D)1,3,4,6,5,2.

Question 79

Pearson Electric Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
What is the estimated total cost at an operating level of 1,180 hours?

A)$10,060.
B)$10,145.
C)$10,015.
D)$10,805.
Total cost = $6,520 + ($3.00 x 1,180)= $10,060

Question 80

Mulvey Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost: C = $80,000 + $12M where: C = monthly manufacturing overhead cost and M = machine hours.The standard error of estimate of the regression is $6,000.The standard time required to manufacture one six-unit case of Mulvey's single product is four machine hours.Mulvey applies manufacturing overhead to production on the basis of machine hours,and its normal annual production is 50,000 cases.Mulvey's estimated variable manufacturing overhead cost for a month in which scheduled production is 5,000 cases would be:

A)$80,000.
B)$320,000.
C)$240,000.
D)$360,000.
E)Some amount other than those given above.