Question 1

The term "relevant range" as used in cost accounting means the range over which:

Accepted Answer

A) relevant costs are incurred. 
B) costs may fluctuate. 
C) cost relationships are valid. 
D) cost data is available. 
A) relevant costs are incurred. 
B) costs may fluctuate. 
C) cost relationships are valid. 
D) cost data is available.

Question 2

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)   Using the high-low method to estimate cost behavior,420 maintenance hours in a month would mean the maintenance costs would be budgeted at:

Accepted Answer

A) $3,150. 
B) $3,600. 
C) $3,720. 
D) $3,780. 
A) $3,150. 
B) $3,600. 
C) $3,720. 
D) $3,780.

Question 3

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 cost equation for administrative salaries is:

Accepted Answer

A) Cost = $19,943.58 + $13.00 × Credit-hours. 
B) Cost = $69,474.40 + $114 30 × Credit-hours. 
C) Cost = $96,409.42 + $103.56 × Credit-hours. 
D) Cost = $12,521.26 + $11.99 × Credit-hours. 
A) Cost = $19,943.58 + $13.00 × Credit-hours. 
B) Cost = $69,474.40 + $114 30 × Credit-hours. 
C) Cost = $96,409.42 + $103.56 × Credit-hours. 
D) Cost = $12,521.26 + $11.99 × Credit-hours.

Question 4

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:   The percent of the total variance that can be explained by the regression is:

Accepted Answer

A) 0.965. 
B) 0.932. 
C) 0.925. 
D) 0.982. 
A) 0.965. 
B) 0.932. 
C) 0.925. 
D) 0.982.

Question 5

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 fixed portion of administrative salaries is:

Accepted Answer

A) Cost = $103.56. 
B) Cost = $12,521.26. 
C) Cost = $19,943.58. 
D) Cost = $96,409.42. 
A) Cost = $103.56. 
B) Cost = $12,521.26. 
C) Cost = $19,943.58. 
D) Cost = $96,409.42.

Question 6

Which cost estimation method does not use the company's cost information as its primary source of information about the relationship between total costs and activity levels?

Accepted Answer

A) Scattergraph. 
B) High-low. 
C) Account analysis. 
D) Regression analysis. 
E) Engineering estimates. 
A) Scattergraph. 
B) High-low. 
C) Account analysis. 
D) Regression analysis. 
E) Engineering estimates.

Question 7

The controller of Joy Co has requested a quick estimate of the manufacturing supplies needed for the Morton Plant for the month of July,when production is expected to be 470,000 units to meet the ending inventory requirements and sales of 475,000 units.Joy Co's budget analyst has the following actual data for the last three months.   Using the high-low method to develop a cost estimating equation,the estimate of needed manufacturing supplies for July would be: (CMA adapted)

Accepted Answer

A) $681,500. 
B) $688,750. 
C) $749,180. 
D) $752,060. 
A) $681,500. 
B) $688,750. 
C) $749,180. 
D) $752,060.

Question 8

In the standard regression equation of y = a + bx,the letter y is best described as the:

Accepted Answer

A) independent variable. 
B) dependent variable. 
C) slope of the equation. 
D) intercept of the equation. 
A) independent variable. 
B) dependent variable. 
C) slope of the equation. 
D) intercept of the equation.

Question 9

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 the high-low method to estimate costs,the fixed cost portion of the cost equation for administrative salaries is:

Accepted Answer

A) $198,808. 
B) $69,474.40. 
C) $96,409.42. 
D) $19,943.58. 
A) $198,808. 
B) $69,474.40. 
C) $96,409.42. 
D) $19,943.58.

Question 10

In general,the account analysis method focuses on the underlying relationship between cost and activities from the previous period.The identification of the relationship between this relationship (the dependent and independent variable)is key to the analysis.

Accepted Answer

A) True 
 B)False

Question 11

The Chambers 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 variable cost per machine hour using the high-low method to estimate the cost equation?

Accepted Answer

A) $2.78. 
B) $2.86. 
C) $3.10. 
D) $3.38. 
A) $2.78. 
B) $2.86. 
C) $3.10. 
D) $3.38.

Question 12

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)   What is the fixed cost per month using the high-low method to estimate the cost equation?

Accepted Answer

A) $570. 
B) $600. 
C) $1,140. 
D) $2,250. 
A) $570. 
B) $600. 
C) $1,140. 
D) $2,250.

Question 13

In the learning curve equation Y = aXb,the Y term represents:

Accepted Answer

A) the labor time required to produce the first unit. 
B) the labor time required to produce the last single unit. 
C) the cumulative number of units. 
D) the index of learning. 
A) the labor time required to produce the first unit. 
B) the labor time required to produce the last single unit. 
C) the cumulative number of units. 
D) the index of learning.

Question 14

Different cost estimations methods may produce different cost equations,even when using the same set of data.The general rule is that moving up the hierarchy of cost estimation methods will cost more to implement but will return a more accurate result.

Accepted Answer

A) True 
 B)False

Question 15

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 administrative costs in a month with 1,000 credit hours would be: (rounded to the nearest whole dollar)

Accepted Answer

A) $198,808. 
B) $201,000. 
C) $199,969. 
D) $96,409. 
A) $198,808. 
B) $201,000. 
C) $199,969. 
D) $96,409.

Question 16

The engineering method of determining cost behavior is particularly useful for new activities or products.This is true because there often is no history to rely on.

Accepted Answer

A) True 
 B)False

Question 17

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)   What would be the cost equation if the high-low method is used?

Accepted Answer

A) Maintenance Costs = 9.00 × Hours of Activity. 
B) Maintenance Costs = 3,600 + 400 × Hours of Activity. 
C) Maintenance Costs = 570 + 7.50 × Hours of Activity. 
D) Maintenance Costs = 34.469 + .99724 × Hours of Activity. 
A) Maintenance Costs = 9.00 × Hours of Activity. 
B) Maintenance Costs = 3,600 + 400 × Hours of Activity. 
C) Maintenance Costs = 570 + 7.50 × Hours of Activity. 
D) Maintenance Costs = 34.469 + .99724 × Hours of Activity.

Question 18

One advantage that regression techniques have over other cost estimation methods is it generates information that can be used to determine how well the estimated cost equation will predict future costs.It is objective,provides a number of statistics not available from other methods,and could be the only feasible method when more than one predictor is used.

Accepted Answer

A) True 
 B)False

Question 19

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 the high-low method to estimate costs,the cost equation for electricity cost is:

Accepted Answer

A) Cost = $3,726.88 + $5.77 × Machine-hours. 
B) Cost = $1,625.00 + $6.25 × Machine-hours. 
C) Cost = $6.90 × Machine-hours. 
D) Cost = $22,825. 
A) Cost = $3,726.88 + $5.77 × Machine-hours. 
B) Cost = $1,625.00 + $6.25 × Machine-hours. 
C) Cost = $6.90 × Machine-hours. 
D) Cost = $22,825.

Question 20

A disadvantage of the high-low method of cost analysis is that it:

Accepted Answer

A) typically results in a totally inaccurate cost formula. 
B) is too time consuming to apply. 
C) uses only two data points,which may not be representative of normal conditions. 
D) relies totally on the judgment of the person performing the cost analysis. 
A) typically results in a totally inaccurate cost formula. 
B) is too time consuming to apply. 
C) uses only two data points,which may not be representative of normal conditions. 
D) relies totally on the judgment of the person performing the cost analysis.

The term "relevant range" as used in cost accounting means the range over which:

Which cost estimation method does not use the company's cost information as its primary source of information about the relationship between total costs and activity levels?

In the standard regression equation of y = a + bx,the letter y is best described as the:

In general,the account analysis method focuses on the underlying relationship between cost and activities from the previous period.The identification of the relationship between this relationship (the dependent and independent variable)is key to the analysis.

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

Different cost estimations methods may produce different cost equations,even when using the same set of data.The general rule is that moving up the hierarchy of cost estimation methods will cost more to implement but will return a more accurate result.

The engineering method of determining cost behavior is particularly useful for new activities or products.This is true because there often is no history to rely on.

A disadvantage of the high-low method of cost analysis is that it:

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters

Exam 5: Cost Estimation

The term "relevant range" as used in cost accounting means the range over which:

Which cost estimation method does not use the company's cost information as its primary source of information about the relationship between total costs and activity levels?

In the standard regression equation of y = a + bx,the letter y is best described as the:

In general,the account analysis method focuses on the underlying relationship between cost and activities from the previous period.The identification of the relationship between this relationship (the dependent and independent variable)is key to the analysis.

In the learning curve equation Y = aXb,the Y term represents:

Different cost estimations methods may produce different cost equations,even when using the same set of data.The general rule is that moving up the hierarchy of cost estimation methods will cost more to implement but will return a more accurate result.

The engineering method of determining cost behavior is particularly useful for new activities or products.This is true because there often is no history to rely on.

A disadvantage of the high-low method of cost analysis is that it:

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters

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