Exam 5: Cost Estimation

Because outliers are extreme data points,they can be included in the regression analysis and not significantly affect the results.Outliers will significantly affect the results as they did in the High and Low analysis.

Which of the following cost estimation methods finds the variable portion of a mixed cost before calculating the fixed portion?

The Wiscow Manufacturing Company recorded overhead costs of $14,182 at an activity level of 4,200 machine hours and $8,748 at 2,300 machine hours.The records also indicated that overhead of $9,730 was incurred at 2,600 machine hours.What is the total estimated cost for 2,600 machine hours using the high-low method to estimate the cost equation?

Which of the following statements is (are)true regarding cost behaviors? (A)In general,accounting records accumulate cost information according to its behavior.(B)Cost behaviors are the most important consideration in managerial decision making.

A manager is trying to estimate the manufacturing costs of a new product.The company makes several other products that utilize some of the same manufacturing procedures as the new product.Which cost estimation method would be the best method to determine the total cost of manufacturing the new product?

In the learning curve equation Y = aX^b,the "b" term represents:

One advantage of the engineering method is that it does not require data from prior periods to estimate cost behavior.The engineering method is based on what needs to be done,not what was done in prior periods.

In the learning curve equation Y = aX^b,the X term represents:

A basic assumption of most cost estimation methods is cost behavior patterns are linear within the relevant range.Most cost estimation models are linear models and assume that the underlying data is linear.

In general,the use of multiple independent variables increases the proportion of the variation in the dependent variable explained by the cost equation.This is a basic principal.The adjusted R-squared (R²)is the correlation coefficient squared and adjusted for the number of independent variables used to make the estimate.This adjustment to R² recognizes that as the number of independent variables increases,R² (unadjusted)increases.

One advantage of the account analysis method for estimating cost behavior is that it includes actual work conditions.The account analysis method is based on existing circumstances.

Which of the following statements regarding the learning phenomenon is true?

Which of the following is a common assumption of cost estimation?

The Armer Company is accumulating data to be used in preparing its annual profit plan for the coming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff has suggested that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs.Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows: (CMA adapted) Based upon the data derived from the regression analysis,420 maintenance hours in a month would mean the maintenance costs would be budgeted at: (rounded to the nearest whole dollar)

Mount Company incurred a total cost of $8,600 to produce 400 units of pulp.Each unit of pulp required five (5)direct labor hours to complete.What is the total fixed cost if the variable cost was $1.50 per direct labor hour?

Thul Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow: If the controller uses regression analysis to estimate costs,the estimate of the fixed portion of electricity cost is:

The Business School at Eastern College is accumulating data as a first step in the preparation of next year's budget development.One cost that is being looked at closely is administrative costs as a function of student credit hours.Data on administrative costs and credit hours for the past thirteen months are shown below: The controller's office has analyzed the data and has given you the results from the regression analysis: Based on the results of the regression analysis,the estimate of the variable portion of administrative costs in a month with 200 credit hours would be:

In determining cost behavior in business,the cost function is often expressed as Y = a + bX.Which one of the following cost estimation methods should not be used in estimating fixed and variable costs for the equation? (CMA adapted)

Hawkins Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: How much time will be needed to complete the 8^th unit?

The Business School at Eastern College is accumulating data as a first step in the preparation of next year's budget development.One cost that is being looked at closely is administrative costs as a function of student credit hours.Data on administrative costs and credit hours for the past thirteen months are shown below: The controller's office has analyzed the data and has given you the results from the regression analysis: If the controller uses regression analysis to estimate costs,the estimate of the variable portion of administrative salaries is: