Acc 314 Ch 10

If the total cost function is y = 5,000 + 7X, calculate the variable cost for 4,000 units.

$28,000

Which of the following is the mathematical expression to calculate the coefficient of determination?

Coefficient of determination = 1 - (Unexplained variation / Total variation)

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

Cost drivers are independent variables.

Which of the following statements shows a difference between simple regression and multiple regression?

Simple regression uses only one dependent and one independent variable, whereas multiple regression uses one dependent and more than one independent variable.

Which of the following is a step to overcome problems related to data collection for estimating cost function?

The analyst should remove the inflationary effects.

Which of the following statements is true of activity-based costing?

There is a clear cause-and-effect relationship between costs and the cost driver in the long run.

A steeply sloped regression line indicates ________.

a strong relationship between the cost driver and costs

A plot of data that results in bunched points with little slope generally indicates ________.

a weak relationship

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

an economically plausible relationship with the cost driver

If machine maintenance is scheduled at a time when production is at a low level, then ________.

an understanding of operations is needed to determine an appropriate cost driver

A plot of data that results in one extreme observation most likely indicates that ________.

an unusual event such as a plant shutdown occurred during that month

The conference method estimates cost functions ________.

based on analysis and opinions gathered from various departments

The smaller the residual terms, the ________.

better is the fit between the actual cost observations and estimated costs

The account analysis method estimates cost functions ________.

by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis

The high-low method ________.

calculates the slope coefficient using only two observed values within the relevant range and their respective costs

When using the high-low method, the two observations used are the high and low observations of the ________.

cost driver

The cost to be predicted is referred to as the ________.

dependent variable

When using the high-low method, the numerator of the equation that determines the slope is the ________.

difference between the costs associated with highest and lowest observations of the cost driver

An inaccurate cost function with a constant that is estimated too high may most likely result in ________.

evaluating a weak manager as providing strong performance

Data collection problems arise when ________.

fixed and variable costs are not separately identified and both are allocated to products on a per unit basis

Which of the following is a problem related to cost analysis?

fixed costs are allocated as if they are variable costs

The cost function y = 150 + 10X ________.

has an intercept of 150

The learning-curve models presented in the text examine ________.

how efficiency increases as more units are produced

An inaccurate cost function with a slope coefficient that is estimated too low may most likely result in ________.

initiating cost cutting measures when they are unnecessary

The cost function y = 2,000 + 6X ________.

is a straight line

A step variable-cost function ________.

is often approximated with a continuous variable-cost function

In the estimation of a cost function using quantitative analysis, the independent variable ________.

is the factor used to predict the dependent variable

Which of the following statements is true of a linear cost function?

it presents variable cost as a slope coefficient.

Which of the following is a nonlinear cost function?

learning curve function

Which of the following is an example of nonlinear cost function?

learning curves

Goodness-of-fit measures how well the predicted values in a cost estimating equation ________.

match the actual cost observations

A cost function is a ________.

mathematical description of how a cost changes with changes in the level of an activity relating to that cost

Regression analysis ________.

measures the average amount of change in the dependent variable associated with a unit change in one or more independent variables

An experience curve ________.

measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases

In multiple regression, when two or more independent variables are highly correlated with one another, the situation is known as ________.

multicollinearity

The ideal database for estimating cost functions contains ________.

numerous cost driver observations

Cross-sectional data analysis includes ________.

observing different entities during the same time period

Which of the following represents cross-sectional data?

personnel costs of a month at 10 different organizations

The slope of the line of regression is the ________.

rate at which the dependent variable varies

The cost function y = 10,000 + 3X ________.

represents a mixed cost

A learning curve is a function ________.

that measures the decline in labor-hours per unit due to workers becoming better at a job

Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed, or mixed using qualitative methods?

the account analysis method

Which cost estimation method is being used by Genend's Good Value Appliance Store?

the account analysis method

Which cost estimation method is being used by Isondo's TV and Appliance Store?

the account analysis method

Which cost estimation method is being used by Auric Company?

the conference method

Which cost estimation method is being used by Verill Company?

the conference method

With a step fixed-cost function ________.

the cost remains the same over wide ranges of the activity in each relevant range

Which of the following is a learning-curve model?

the cumulative average-time learning model and the incremental unit-time learning model

Which cost estimation method may use time-and-motion studies to analyze the relationship between inputs and outputs in physical terms?

the industrial engineering method

Which cost estimation method uses a formal mathematical method to develop cost functions based on past data?

the quantitative analysis method

Which of the following is a step followed by an analyst to overcome problems related to data collection for estimating cost function?

to eliminate unusual observations if extreme values of observations occur

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

total fixed cost have decreased

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

two or more independent variables are highly correlated with one another

As a result of learning curve, ________.

unit costs decrease as productivity increases and the unit-cost function behaves nonlinearly

Quantitative analysis methods estimate cost functions ________.

using a formal mathematical method to fit cost functions to past data observations

Time-series data analysis includes ________.

using a variety of time periods to measure the dependent variable

Crimson Services, Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified?

variable cost

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

variable cost per unit has decreased

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?

y = 200 + 4.50X

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?

y = 500 + 1.85X

The cost components of a heater include $30 for the compressor, $10 for the sheet molded compound frame, and $75 per unit for assembly. The factory machines and tools cost is $60,000. The company expects to produce 1,000 heaters in the coming year. What cost function best represents these costs?

y = 60,000 + 115X

Which of the following functions represents the least total cost assuming the number of units is equal in each case?

y = 90 + 6X

Which of the following is an equation of a fixed cost function?

y = a

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?

y = a + bX