Question 1

Lee Hardware produces bins. Each bin sells for $16. Information for June appears below.  Which of the following represents Lee's cost equation?

Accepted Answer

A)   Y = $16.00X + $28,728
B)   Y = $4.40X + $28,728
C)   Y = $6.84X + $18,480
D)   Y = $4.40X + $18,480 B

Question 2

Which of the following is not a way to manage costs?

Accepted Answer

A)  Predict costs under different future conditions.
B)  Institute measures to control costs.
C)  Plan and budget costs.
D)  Compare actual costs to expected future costs. B

Question 3

You are planning a retirement party and have rented space at a capacity of 80 people at a total cost of $800 for the evening. Food is expected to cost $34 per person. Drinks will be provided to attendees at a rate of $8 per drink and each attendee is expected to have on average, two drinks. By how much will the variable cost line rise on a graph for each additional attendee?

Accepted Answer

A)  $42
B)  $50
C)  $52
D)  $60 B

Question 4

Use of a scatter-plot

Accepted Answer

A)   mitigates the risk of using outliers as a basis for the cost equation.
B)   depicts a line using the two high and low data points.
C)   obscures extreme data points.
D)   can help identify the most important data point.

Question 5

The learning curve approach assumes a

Accepted Answer

A)   linear cost function.
B)   nonlinear cost function.
C)   that each unit will take the same amount of time to produce.
D)   regardless of training, production time per unit cannot be reduced.

Question 6

Sustainable Solutions, Inc. incurred the following costs during the previous month:  Determine which of the costs in the table are variable, fixed or mixed and give an explanation for your classification for each cost.

Accepted Answer

The answer of Sustainable Solutions, Inc. incurred the following costs...

Question 7

For which of the following can the account analysis method be used?
I. To identify the relevant range
II. To determine the cost equation for multiple periods of data.
III. To estimate costs at different levels of activity

Accepted Answer

A)   I and II
B)   II and III
C)    I and III
D)   II only

Question 8

A linear cost equation

Accepted Answer

A)   is derived from two elements - the relevant range and the level of activity.
B)   is used to estimate future costs.
C)   includes three components - fixed costs, variable costs and mixed costs.
D)   is fixed when the volume is zero and increases at a constant rate per activity level after that.

Question 9

Imani is studying for her first accounting exam. She is unsure of what the teacher will ask on the exam or the material covered, so she plans to study for 4 hours. On the second exam, Imani feels more comfortable with the exam format and material, and given that she believes she has an 85% learning curve, how long should she have to study in order to achieve the same results as she received on the first exam?

Accepted Answer

The answer of Imani is studying for her first accounting...

Question 10

If one were to apply a linear cost function to labor, the implication would be that

Accepted Answer

A)   the time to make an additional unit increases over time.
B)   the time to make each additional unit decreased over time.
C)   each unit requires the same amount of time to produce.
D)   there is an inverse relationship between cost and the cost driver.

Question 11

Which method is the most comprehensive method for estimating costs? Explain.

Accepted Answer

The answer of Which method is the most comprehensive method...

Question 12

When using cost prediction methods, output

Accepted Answer

A)   always establishes a cause-and-effect relationship if positively correlated.
B)   reliability depends on thoughtful, rational relationships between cost drivers and their costs.
C)   Is dependable regardless of the input as long as a regression method is use.
D)   Is less reliable if a regression method is used instead of a high-low or account analysis method.

Question 13

In creating a scatter plot using Excel, which of the following is true?

Accepted Answer

A)   Upon selecting the data then scatter chart icon, the scatter chart is displayed with the data.
B)   After the scatter chart icon is selected, the date selected.
C)   The cost driver is graphed on the horizontal axis.
D)   The chart title is selected at the same time the data is selected to ensure the chart contains the proper title once created.

Question 14

Mario Finzelli has just learned how to make his grandfather's famous pizza recipe. To make his first pizza, it took him 15 minutes. It should take him only 10 minutes to make a pizza. What learning curve percentage will he need to experience in order to get to the 10 minute mark by the time he makes his 4 pizzas?

Accepted Answer

The answer of Mario Finzelli has just learned how to...

Question 15

What is meant by a multiple regression?

Accepted Answer

A)   The same variables (both independent and dependent)  are simply run multiple times in the same regression to ensure statistical significance.
B)   The same regression is run as was previously run, but with multiple independent variables (X)  to estimate one cost function.
C)   The same regression is run with the same variables, but with supporting analyses such as account analysis and high-low method.
D)   The use of the same regression run multiple times to eliminate the need for the evaluation criteria for the validity of the input and output.

Question 16

How is a scatter plot used to predict future costs?

Accepted Answer

The answer of How is a scatter plot used to...

Question 17

Mama Leone is canning her fresh tomatoes so that she can make spaghetti sauce later in the year. It took her 30 minutes from start to finish for her first canning jar, and she has 4 hours (240 minutes) to complete the canning process. If she has a learning curve of 90%, how many jars of tomatoes will she be able can?

Accepted Answer

The answer of Mama Leone is canning her fresh tomatoes...

Question 18

Which of the following is considered to be a risk of the high-low method?

Accepted Answer

A)   The relevant range
B)   Outliers
C)   Requires judgment
D)   Requires software to handle all the data points

Question 19

Which of the following metrics would not be used to evaluate the validity of the regression model?

Accepted Answer

A)   Economic plausibility
B)   Statistical significance of the slope
C)   Cause-and-effect negative relationships
D)   Goodness of fit

Question 20

The town of Jim Thorpe, Pennsylvania operates a scenic railway business for tourists. The town is trying to create a cost function for labor costs, which has been identified as a mixed cost, associated with operating the railway. The following data has been gathered related to the labor costs and two possible cost drivers, the number of trips and gross ticket revenues by month. 
  Required: 
a. Using the high-low method, determine the cost function for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver.
b. Prepare a scatter plot for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver using the templates below. Based on the scatter plot, which appears to be a more relevant cost driver?
(1)

(2)

Accepted Answer

The answer of The town of Jim Thorpe, Pennsylvania operates...

Exam 3: Cost Behavior and Estimation

Lee Hardware produces bins. Each bin sells for $16. Information for June appears below. Which of the following represents Lee's cost equation?