Exam 10: Determining How Costs Behave

An experience curve ________.

How many separate cost pools should be formed given the following information? Cost Cost driver Postage costs \# of brochures mailed Printing and paper costs \# of brochures mailed Quality control costs \# of inspections Customer service costs \# of customers served

What are the three criteria a company should use to evaluate and choose a cost driver? Briefly explain each of the three criteria.

Isondo's TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2015 operations. Sales (1,200 televisions) \ 1,200,000 Cost of goods sold 540,000 Store manager's salary per year 108,000 Operating costs per year 216,000 Advertising and promotion per year 24,000 Commissions ( 3\% of sales) 36,000 -Which cost estimation method is being used by Isondo's TV and Appliance Store?

Arfaei Company manufactures chairs.Because the efforts of manufacturing are approximately equal between labor and machinery,management is considering other possible cost drivers.By considering different cost drivers,it is anticipated that the estimating process can be improved.The following cost estimating equations with their r² values have been determined for 20X5: 1. $X =$ cutting time $\quad y = \$ 19,500 + \$ 20 X \quad r ^ { 2 } = 0.65$ 2. $X =$ labor $\quad\quad\quad \mathrm { y } = \$ 5,000 + \$ 25 X \quad \mathrm { r } ^ { 2 } = 0.49$ 3. $X =$ machinery $\quad y = \$ 44,500 + \$ 5 X \quad r ^ { 2 } = 0.55$ Required: a.Which equation should be selected for the analysis? b.What other factors should be included in the selection of the estimating equation?

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

The cumulative average-time learning model with a 85% learning curve indicates that if it takes 200 minutes to manufacture the first unit of a new model,then the second unit will take only 170 minutes to manufacture.

A finance manager has to select one of the four different suppliers of raw materials.The total cost functions under the four options are given below.Assume the quality of the raw material to be the same,which of the following is preferred by the finance manager?

For February,the cost components of a picture frame include $0.30 for the glass,$0.75 for the wooden frame,and $0.80 for assembly.The assembly desk and tools cost $500.Two hundred fifty frames are expected to be produced in the coming year.What cost function best represents these costs?

Which of the following is true if a slope coefficient in a cost function is decreased from the last year?

Bennet Company employs 20 individuals.Eighteen employees are paid $18 per hour and the rest are salaried employees paid $3,000 a month.Which of the following is the total cost function of personnel?

What are the two assumptions behind a simple linear cost function? Briefly explain the three ways that a linear cost function may behave?

Prelia's Storage ran its freezer in February,a slow month,for 378 hours for a total cost of $61,230.In July,a peak month,the freezer ran for 756 hours for a total cost of $87,690. Required: a.What is the cost estimating equation for the department if hours of freezer use are used as the cost driver? b.What is the estimated total cost at an operating level of 600 hours?

All individual cost items included in the dependent variable should have ________.

The standard error of the estimated coefficient indicates how much the estimated value,b,is likely to be affected by random factors.

Which of the following is true if the constant in the cost function is low compared to the last year?

The conference method estimates cost functions ________.

The t-value of a coefficient measures how large the value of the estimated coefficient is relative to its standard error.

Two common forms of quantitative analysis methods of cost estimation are the high-low method and regression analysis.

In estimating a cost function using quantitative analysis,the dependent variable is the factor used to predict the independent variable.