Ch. 10 T/F

It can be inferred that when there is a high correlation b/w two variables, one is the cause of the other

FALSE

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

FALSE, Second unit set up time = 200 x .85 = 170; (200+x)/2 = 170; x = 140 minutes

Cross-sectional data pertain to the same entity over successive past period

FALSE, Time-series data

In using Hi-Lo method, the slope coefficient is calculated by dividing the difference b/w highest and lowest observations of the cost driver by the difference b/w costs associated with highest and lowest observations of the cost driver

FALSE, dividing difference b/w costs associated with highest and lowest observations of the cost driver by the difference b/w highest and lowest observations of the cost driver

Activity-based costing systems use the quantitative analysis method exclusively for cost estimation b/c of it's accuracy

FALSE, estimation methods, industrial engineering method, conference method, and quantitative analysis method

Fixed costs are sometimes allocated to individual products as part of the standard costing system. When this is the case, they should be treated as variable costs for purposes of future cost estimation.

FALSE, fixed cost per unit should not be allocated as a variable cost

An "economy of scale" function is an example of a linear cost function

FALSE, possibility of producing double the product for less than double the cost; the function would be nonlinear

A flat or slightly sloped regression line indicates a strong relationship b/w the cost driver and costs

FALSE, weak relationship

In the cumulative average-time learning model, cumulative average time per unit declines by a constant percentage each time the cumulative quantity of units produced doubles

TRUE

The conference method and the account analysis method use subjective assessments tot choose a cost driver and to estimate the fixed and variable components of the cost function

TRUE

The major advantages of quantitative methods are that they are objective, so managers can use them to evaluate different cost drivers

TRUE

The incremental unit-time learning model with a 80% learning cure indicates that if it takes 150 minutes to manufacture the first unit of a model, then the second unit will take only 120 minutes to manufacture

TRUE, Second unit set up time = 150 x .80 = 120 minutes