Question 1

Multicollinearity exists in multiple linear regression when two or more predictor variables are highly correlated with each other.

Accepted Answer

A) True 
 B)False

Question 2

Use the information below to answer the following question(s).
Miller's Good Value Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2012 operations.
 
-What are two of the assumptions against which data should be evaluated when used to develop a linear cost function? Briefly explain the three ways that a linear cost function may behave?

Accepted Answer

The answer of Use the information below to answer the...

Question 3

Goodness-of-fit measures how well the predicted values in a cost estimating equation

Accepted Answer

A)  match the cost driver. 
B)  match the actual cost observations. 
C)  fit the coefficient of determination. 
D)  rely on the independent variable. 
E)  rely on the dependent variable

Question 4

Compute the estimated costs for each of the following equations, assuming the following costs for July:  In addition, state whether each is for a variable, fixed, or mixed cost.
A) Total estimated costs = intercept
B) Total estimated costs = constant
C) Total estimated costs = constant + (slope × cost driver)
D) Total estimated costs = slope coefficient × cost driver

Accepted Answer

The answer of Compute the estimated costs for each of...

Question 5

Use the information below to answer the following question(s).
Bernie Company used regression analysis to predict the annual cost of indirect materials. The results were as follows:
Indirect Materials Cost Explained by Units Produced
 
-The coefficient of determination is

Accepted Answer

A)  22.00000. 
B)  12.00000. 
C)  2.350000. 
D)  0.918300. 
E)  0.437525.

Question 6

A mixed cost has a fixed element.

Accepted Answer

A) True 
 B)False

Question 7

In regression analysis, the term independence of residuals means

Accepted Answer

A)  the residual term for any one observation is not related to the residual term of any other observation. 
B)  the data exhibit serial correlation. 
C)  the data exhibit autocorrelation. 
D)  there is a systematic pattern of positive residuals. 
E)  there is a systematic pattern of either only positive or only negative residuals.

Question 8

There is a homogeneous relationship between the individual cost items in the dependent variable pool and the cost driver when each activity whose costs are included in the dependent variable has the same cost driver.

Accepted Answer

A) True 
 B)False

Question 9

Brandt Cheque Encoders employs 30 individuals. Ten employees are paid $10 per hour for 173 hours a month and the rest are salaried employees paid $6,000 a month. How would total costs of personnel be classified?

Accepted Answer

A)  variable and fixed 
B)  a fixed cost within a relevant range 
C)  a variable cost within a relevant range 
D)  a mixed cost 
E)  a fixed cost

Question 10

There is poor correlation if the predicted values do not match actual cost observation.

Accepted Answer

A) True 
 B)False

Question 11

Simple linear regression differs from multiple linear regression in that

Accepted Answer

A)  multiple linear regression uses all available data to estimate the cost function whereas simple linear regression only uses simple data. 
B)  simple linear regression is limited to the use of only the outcome variables and multiple linear regression can use both outcome and predictor variables. 
C)  simple linear regression uses only one predictor variable and multiple linear regression uses more than one predictor variable. 
D)  simple linear regression uses only one outcome variable and multiple linear regression uses more than one outcome variable. 
E)  the lease squares technique cannot be used for simple linear regression whereas it can be used for multiple linear regression.

Question 12

The collection of information on costs and their drivers, gathered through observations and interviews, from departments within an organization is known as

Accepted Answer

A)  the account analysis method. 
B)  the conference method. 
C)  the industrial-engineering method. 
D)  the quantitative analysis method. 
E)  the departmental analysis method.

Question 13

Answer the following question(s) using the information below.
The Taranto Company uses the high-low method to estimate it's cost function. The information for 2012 is provided below:
 
-What is the estimate of the total cost when 1,100 machine-hours are used?

Accepted Answer

A)  $125,000 
B)  $135,000 
C)  $150,000 
D)  $200,000 
E)  $136,000

Question 14

Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver.
a. Direct materials cost is $.75 per pound.
b. Direct labour cost is $16.75 per hour.
c. Auto rental has a fixed fee of $75.00 per day plus $.50 per mile driven.
d. Machine operating costs include $350 of maintenance per month, and $5.00 of coolant usage costs for each day the machinery is in operation.

Accepted Answer

The answer of Write a linear cost function equation for...

Question 15

Use the information below to answer the following question(s).
Miller's Good Value Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2012 operations.
 
-What was the variable cost per unit sold for 2012?

Accepted Answer

The answer of Use the information below to answer the...

Question 16

A nonlinear cost function adequately describes the changes in the levels of the cost driver due to changes in the behaviour of various costs.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is TRUE concerning the collection of data to be used in estimating a cost function?

Accepted Answer

A)  Data should contain observations for periods both before and after a major economic or technological change. 
B)  The time periods used to measure the outcome variable and the cost driver(s) should not be concurrent. 
C)  Both time series data and cross-sectional data are relevant, although both are not required. 
D)  All data should be viewed as being representative of the normal relationship between the outcome variable and the cost driver. 
E)  Data should contain observations for periods both before and after a major economic or technological change, and, both time series data and cross-sectional data are required.

Question 18

Answer the following question(s) using the information below.
Penny's TV and Appliance Store is a small company that has the following information pertaining to 2012 operations.
 
-What are the estimated total costs if Penny's expects to sell 3,000 units next year?

Accepted Answer

A)  $896,000 
B)  $678,000 
C)  $1,259,000 
D)  $269,000 
E)  $542,000

Question 19

Use the information below to answer the following question(s).
Raymaster is a small computer software company which uses the account analysis method and has hired you to perform some management advisory services. The company sold 2,500 high quality payroll programs last year.
 
-What would be their estimated cost per unit if Raymaster expects to sell 2,000 units next year?

Accepted Answer

A)  $300 
B)  $312 
C)  $370 
D)  $498 
E)  $500

Question 20

Which cost estimation method is being used by Penny's TV and Appliance Store?

Accepted Answer

A)  the industrial engineering method 
B)  the conference method 
C)  the high-low method 
D)  the quantitative analysis method 
E)  the account analysis method

Exam 10: Quantitative Analyses of Cost Functions

Multicollinearity exists in multiple linear regression when two or more predictor variables are highly correlated with each other.

Goodness-of-fit measures how well the predicted values in a cost estimating equation

Use the information below to answer the following question(s) . Bernie Company used regression analysis to predict the annual cost of indirect materials. The results were as follows: Indirect Materials Cost Explained by Units Produced -The coefficient of determination is

A mixed cost has a fixed element.

In regression analysis, the term independence of residuals means

There is a homogeneous relationship between the individual cost items in the dependent variable pool and the cost driver when each activity whose costs are included in the dependent variable has the same cost driver.

Brandt Cheque Encoders employs 30 individuals. Ten employees are paid $10 per hour for 173 hours a month and the rest are salaried employees paid $6,000 a month. How would total costs of personnel be classified?

There is poor correlation if the predicted values do not match actual cost observation.

Simple linear regression differs from multiple linear regression in that

The collection of information on costs and their drivers, gathered through observations and interviews, from departments within an organization is known as

Answer the following question(s) using the information below. The Taranto Company uses the high-low method to estimate it's cost function. The information for 2012 is provided below: -What is the estimate of the total cost when 1,100 machine-hours are used?

Use the information below to answer the following question(s). Miller's Good Value Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2012 operations. -What was the variable cost per unit sold for 2012?

A nonlinear cost function adequately describes the changes in the levels of the cost driver due to changes in the behaviour of various costs.

Which of the following is TRUE concerning the collection of data to be used in estimating a cost function?

Answer the following question(s) using the information below. Penny's TV and Appliance Store is a small company that has the following information pertaining to 2012 operations. -What are the estimated total costs if Penny's expects to sell 3,000 units next year?

Which cost estimation method is being used by Penny's TV and Appliance Store?