Exam 2: Cost Concepts, Behaviour, and Estimation

Paula's Kennels is located in a small city in Nova Scotia. 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. Paula's relevant range of activity would best be measured in terms of:

Which cost estimation technique is useful in all situations?

The total cost of salaries of production supervisors, where 2 supervisors are needed for each 8-hour shift, and the relevant range is 0 units to the number of units that can be produced at full capacity using 2 8-hour shifts is a:

A manager might use this method to create a graph of cost behaviour without any statistical techniques.

If firm A has a learning curve with 90% learning and firm B has a learning curve with 80% learning, then:

Which of the following methods of estimating future costs can be used when only one period of data is available?

Fixed costs:

Past cost information might be too unreliable for future cost estimation because:

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

The rent on a store, where the landlord charges $1,200 per month plus a percentage of sales revenue, is a:

Simple regression analysis output produces a variety of statistics. Which of the following statistics provides information for variable costs?

Past costs are irrelevant for decision-making, but may be relevant for predicting future costs.

Direct costs are:

Simple regression analysis produces an equation of the form: Y = $\alpha$ + $\beta$ X + $\varepsilon$

When estimating future costs, information quality is higher when:

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

Regression analysis usually provides a higher quality cost function than the high-low method.

The first step in estimating a cost function for relevant costs is to select a cost estimation technique.

Bava Company wants to develop a cost function for its maintenance costs to estimate such costs for the coming year. The following data are available: Direct Maintenance Month Labour Hours Costs Incurred June 4,000 \ 900 July 6,500 1,325 August 7,000 1,500 September 5,500 1,150 Using the high-low method, what is the cost function for maintenance costs?

Three different divisions of a footwear manufacturing company are estimating costs for their human resources departments. Each division has a cost structure that is different from the other divisions' and those structures are represented by the following cost behaviour patterns (A, B, and C). Number of Emplovees Cost A Cost B Cost 0 \ 0 \ 120 \ 118 25 50 118 180 50 100 123 245 75 125 124 296 100 200 119 360 Which cost is best described as fixed?