Question 1

All other things being equal, the longer the time horizon the more likely a cost will be fixed.

Accepted Answer

A) True 
 B)False

Question 2

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below:
 
What is the constant for the estimated cost equation?

Accepted Answer

A)  $277,500 
B)  $300,000 
C)  $165,000 
D)  $135,000 
A)  $277,500 
B)  $300,000 
C)  $165,000 
D)  $135,000

Question 3

When choosing among cost drivers, managers trade off level of detail, accuracy, feasibility, and costs of estimating functions.

Accepted Answer

A) True 
 B)False

Question 4

Jack Williams has just purchased the film studio of a movie company that specializes in comedies. He found that the company did not try to estimate the cost of making a movie. Instead, it just gave the producer a budget and told him/her to make a movie within budget. Mr. Williams does not like the former movie-budget concept and desires to establish a formal cost estimation system.
Required:
What are some of the potential problems that may be encountered in changing from a budget to a cost estimation movie making system?

Accepted Answer

One of the first problems will be the ti

Question 5

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:
 
What is the constant for the estimated cost equation?

Accepted Answer

A)  $12,000 
B)  $16,000 
C)  $20,000 
D)  $32,000 
A)  $12,000 
B)  $16,000 
C)  $20,000 
D)  $32,000

Question 6

When estimating the cost function for each cost pool, the manager must pay careful attention to the cost hierarchy because the cost pool may have more than one cost driver from different levels of the cost hierarchy.

Accepted Answer

A) True 
 B)False

Question 7

The trend in large corporations is a movement away from quantitative analysis of cost drivers to the conference method.

Accepted Answer

A) True 
 B)False

Question 8

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 manufacturing labor is $15 per hour.
b.Direct materials cost $25.60 per cubic yard.
c.Utilities have a minimum charge of $500, plus a charge of $0.25 per kilowatt-hour.
d.Machine operating costs include $250,000 of machine depreciation per year, plus $100 of utility costs for each day the machinery is in operation.

Accepted Answer

a.y = $15X
b.y = $25

Question 9

Quantitative analysis methods estimate cost functions ________.

Accepted Answer

A)  using the time-and-motion studies 
B)  based on analysis and opinions gathered from various departments 
C)  using a formal mathematical method to fit cost functions to past data observations 
D)  using the pooling of knowledge from each value chain function 
A)  using the time-and-motion studies 
B)  based on analysis and opinions gathered from various departments 
C)  using a formal mathematical method to fit cost functions to past data observations 
D)  using the pooling of knowledge from each value chain function

Question 10

Which of the following statements is true of choosing cost drivers under activity-based costing?

Accepted Answer

A)  All the cost drivers should be unit-level cost drivers. 
B)  There should be a clear cause-and-effect relationship between cost drivers and cost pools. 
C)  Cost drivers are independent variables. 
D)  A single cost driver should be identified for all the activities. 
A)  All the cost drivers should be unit-level cost drivers. 
B)  There should be a clear cause-and-effect relationship between cost drivers and cost pools. 
C)  Cost drivers are independent variables. 
D)  A single cost driver should be identified for all the activities.

Question 11

When new products are introduced, learning-curve effects can have a major influence on production scheduling.

Accepted Answer

A) True 
 B)False

Question 12

A major concern that arises with multiple regression is multicollinearity, which exists when ________.

Accepted Answer

A)  the dependent variable is not normally distributed 
B)  the standard errors of the coefficients of the individual variables decrease 
C)  the R2 statistic is low 
D)  two or more independent variables are highly correlated with one another 
A)  the dependent variable is not normally distributed 
B)  the standard errors of the coefficients of the individual variables decrease 
C)  the R2 statistic is low 
D)  two or more independent variables are highly correlated with one another

Question 13

A contractual agreement that specifies a fee per mile driven, such as with a rental of a truck, is not considered a cause-and-effect relationship between an activity and a cost.

Accepted Answer

A) True 
 B)False

Question 14

At the Spring Valley Company Company, the cost of the personnel department has always been charged to production departments based upon number of employees. Recently, opinions gathered from the department managers indicate that the number of new hires might be a better predictor of personnel costs.
Total personnel department costs are $282,000.
 
If the number of new hires is considered the cost driver, what amount of personnel costs will be allocated to Department A? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)

Accepted Answer

A)  $43,759 
B)  $6,845 
C)  $109,980 
D)  $47,913 
A)  $43,759 
B)  $6,845 
C)  $109,980 
D)  $47,913

Question 15

An experience curve ________.

Accepted Answer

A)  is a narrower application of the learning curve 
B)  measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases 
C)  only measures the decline in labor-hours per unit as units produced increases 
D)  measures the increase in cost per unit as productivity increases 
A)  is a narrower application of the learning curve 
B)  measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases 
C)  only measures the decline in labor-hours per unit as units produced increases 
D)  measures the increase in cost per unit as productivity increases

Question 16

The new cost analyst in your accounting department has just received a computer-generated report that contains the results of a simple regression program for cost estimation. The summary results of the report appear as follows:
   
Required:
a.What is the cost estimation equation according to the report?
b.What is the goodness of fit? What does it tell about the estimating equation?

Accepted Answer

a.y = $74.79 + $1,081.76X
b.Goodness of

Question 17

The slope of the line of regression is the ________.

Accepted Answer

A)  rate at which the dependent variable varies 
B)  rate at which the independent variable varies 
C)  difference between the fixed cost and variable cost associated with the cost driver 
D)  difference between actual cost and estimated cost for each observation of the cost driver 
A)  rate at which the dependent variable varies 
B)  rate at which the independent variable varies 
C)  difference between the fixed cost and variable cost associated with the cost driver 
D)  difference between actual cost and estimated cost for each observation of the cost driver

Question 18

One assumption frequently made in cost behavior estimation is that changes in total costs can be explained by changes in the level of a single activity.

Accepted Answer

A) True 
 B)False

Question 19

M & G TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations.
 
What was the variable cost per unit sold for 2017?

Accepted Answer

A)  $30 
B)  $480 
C)  $770 
D)  $450 
A)  $30 
B)  $480 
C)  $770 
D)  $450

Question 20

The Connors Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Connors Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
 
What is the estimated total cost at an operating level of 9,000 hours?

Accepted Answer

A)  $34,200 
B)  $38,200 
C)  $41,400 
D)  $37,800 
A)  $34,200 
B)  $38,200 
C)  $41,400 
D)  $37,800

All other things being equal, the longer the time horizon the more likely a cost will be fixed.

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below: What is the constant for the estimated cost equation?

When choosing among cost drivers, managers trade off level of detail, accuracy, feasibility, and costs of estimating functions.

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the constant for the estimated cost equation?

When estimating the cost function for each cost pool, the manager must pay careful attention to the cost hierarchy because the cost pool may have more than one cost driver from different levels of the cost hierarchy.

The trend in large corporations is a movement away from quantitative analysis of cost drivers to the conference method.

Quantitative analysis methods estimate cost functions ________.

Which of the following statements is true of choosing cost drivers under activity-based costing?

When new products are introduced, learning-curve effects can have a major influence on production scheduling.

A major concern that arises with multiple regression is multicollinearity, which exists when ________.

A contractual agreement that specifies a fee per mile driven, such as with a rental of a truck, is not considered a cause-and-effect relationship between an activity and a cost.

An experience curve ________.

The slope of the line of regression is the ________.

One assumption frequently made in cost behavior estimation is that changes in total costs can be explained by changes in the level of a single activity.

M & G TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. What was the variable cost per unit sold for 2017?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 10: Determining How Costs Behave

All other things being equal, the longer the time horizon the more likely a cost will be fixed.

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below: What is the constant for the estimated cost equation?

When choosing among cost drivers, managers trade off level of detail, accuracy, feasibility, and costs of estimating functions.

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the constant for the estimated cost equation?

When estimating the cost function for each cost pool, the manager must pay careful attention to the cost hierarchy because the cost pool may have more than one cost driver from different levels of the cost hierarchy.

The trend in large corporations is a movement away from quantitative analysis of cost drivers to the conference method.

Quantitative analysis methods estimate cost functions ________.

Which of the following statements is true of choosing cost drivers under activity-based costing?

When new products are introduced, learning-curve effects can have a major influence on production scheduling.

A major concern that arises with multiple regression is multicollinearity, which exists when ________.

A contractual agreement that specifies a fee per mile driven, such as with a rental of a truck, is not considered a cause-and-effect relationship between an activity and a cost.

An experience curve ________.

The slope of the line of regression is the ________.

One assumption frequently made in cost behavior estimation is that changes in total costs can be explained by changes in the level of a single activity.

M & G TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2017 operations. What was the variable cost per unit sold for 2017?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters