ch 5 smart book acct 360

Which of the following are true of the engineering method?

It can detail each step required to perform an operation. It can be used to estimate costs for totally new activities.

Continuous improvement violates which regression analysis assumption?

The process for which costs are being estimated remains constant over time.

When predicting future costs, Blank______.

care should be taken when using historical data

Analysts must be careful when predicting future costs from Blank______ data.

historical

Manufacturing companies like Boeing establishing lower production costs for consecutive units produced is an example of the Blank______.

learning phenomenon

When using the high-low method, the equation that represents the slope of the total cost line (variable cost per unit) is Blank______.

(Cost at highest activity level - Cost at lowest activity level) ÷ (Highest activity level - Lowest activity level)

Which of the following statements are true?

Account analysis is often based on last period's costs. Statistical cost estimation can deal with both random and unusual events. Engineering estimates often omit inefficiencies such as downtime.

Which of the following are true regarding making decisions?

Cost estimates are an important element in helping managers make decisions that add value. Managers need to compare costs and benefits among alternative actions when making decisions.

When managers make decisions, which of the following do they need to compare among alternative actions?

Costs and benefits

Which of the following are advantages of using the engineering estimates method?

Does not require prior data Details each step of the operation

Which of the following are true when choosing an estimation method?

Each method has advantages and disadvantages. Assumptions should be considered on a case-by-case basis. The benefits of using a sophisticated or simpler model need to be considered.

Which of the following methods are used to estimate cost behavior?

Engineering estimates Statistical analysis Account analysis

Which of the following allows companies to identify where "slack" exists in it operations?

Engineering method

Which of the following is not true of regression analysis?

It is costly to perform.

Which of the following are true of the t-statistic?

It is the value of the estimated coefficient divided by its standard error. It is used to test the significance of the coefficient.

Which of the following are true of continuous improvement efforts' impact on regression analysis?

Restricting data to a short period will assume the process remained the same, but result in less reliable estimates. Using longer periods risks using estimates that might not be meaningful.

Which of the following are true of regression analysis output?

The intercept at zero activity is outside of the relevant range of observations. The intercept term in a regression analysis must be interpreted with caution.

When using the high-low method, the equation used to determine total fixed costs is Blank______.

Total cost at lowest activity level - (Variable cost × Lowest activity level) Total cost at the highest level - (Variable cost × Highest activity level)

The cost estimation method that calls for a review of each account used to record costs is called the method.

account analysis

When the correlation coefficient is squared and adjusted for the number of independent variables used to make the estimate, it is called Blank______.

adjusted R2

Some of the more common problems with using regression estimates include Blank______.

attempting to fit a linear equation to nonlinear data including outliers

The learning phenomenon Blank______.

causes a linear cost estimate to overstate the variable cost per unit affects the cost of most professional activities

R-squared (R2) is also called the Blank______.

coefficient of determination

The proximity of the data points to the regression line is called the Blank______.

correlation coefficient

The most common assumptions made in cost estimation analysis are that Blank______.

cost behavior depends on just one cost driver cost behavior patterns are linear within the relevant range

When a firm is operating near its capacity limits Blank______.

costs increase more rapidly than activity the effect of attempting to fit a linear model to nonlinear data is likely to occur

Statistical cost estimation Blank______.

deals with both random and unusual events uses several periods or locations as the basis for estimating cost relations

In regression estimates, the cost to be estimated can be called the Blank______.

dependent variable

Users of regression analysis should Blank______.

examine a plot of the data know the characteristics of the data being used specify the model

Costs that do not change with activity level are costs.

fixed

The intercept term of the output of a regression program is an estimate of Blank______ costs.

fixed

A method to estimate costs based on two cost observations, typically at the highest and lowest levels of activity, is called - cost estimation.

high low

The learning phenomenon can affect costs used in all of the following except Blank______.

hiring decisions

Some of the more common problems with using regression estimates include Blank______.

including predictors with spurious relations to the dependent variable using data that do not fit regression analysis assumptions

The adjusted R2 recognizes that as the number of independent variables increases, the unadjusted R2 Blank______.

increases

In regression estimates, the X term, or predictor, is called the Blank______.

independent variable

When using the general methods to estimate cost behavior, Blank______.

it is a good idea to use multiple methods so results can be compared results are likely to differ from method to method

Users of regression analysis should Blank______.

know the characteristics of the data being used understand the method and its limitations

A systematic relationship between the amount of experience in performing a task and the time required to perform it is referred to as the Blank______.

learning phenomenon

Account analysis does not include Blank______.

modeling and analyzing variables

The effect of attempting to fit a linear model to nonlinear data is likely to occur when a firm is operating Blank______.

near its capacity limits

Activities measured by complexity can use cost drivers that include Blank______.

number of components number of different products

An observation that lies a significant distance away from the regression line and can have an overwhelming effect on the regression estimates is a(n) .

outlier

When the regression line shows an observation that lies a significant distance away from the line, this observation is called a(n) Blank______.

outlier

The statistical technique designed to generate a line that best fits a set of data points is called .

regression

The closer R is to 1.0, the closer the data points are to the Blank______.

regression line

An activity level within which a given total fixed cost or unit variable cost will be unchanged is called the _ _.

relevant range

The activity levels in which total fixed costs and per unit variable costs do not change is known as the Blank______.

relevant range

A visual representation of the fixed-variable relation of costs and activities is called a Blank______.

scattergraph

When beginning a statistical analysis of costs and activities, it is helpful to plot the costs against the activities using a(n) Blank______.

scattergraph

Estimation of a regression to explain direct materials cost by using direct labor costs as the independent variable is an example of a(n) Blank______.

spurious relation

Including many variables in a regression in order to let the program "find" relationships among the variables can lead to Blank______.

spurious relations

The most important step in obtaining regression estimates for cost estimation is to establish the existence of a logical relationship between Blank______.

the independent and dependent variables activities and cost to be estimated

The value of the estimated coefficient (b) divided by its estimated standard error (SEb) is the computation of Blank______.

the t-statistic

Activities measured by volume can use cost drivers that include Blank______.

units of output machine-hours