Ch 3 Practice

Simon, Inc., has five fitters, each of whom can assemble 2,000 machines in a year. Each fitter is paid $24,000 per year. Calculate the activity rate per assembly. $18 per machine $12 per machine $15 per machine $10 per machine

$12 per machine 24000 / 2000 = $12

Fanciful Fan Company has five sales representatives and pays them a salary of $2,000 each per month. It also pays 15% commission on the sale price of each fan. Each fan is sold at a price of $100. Compute the total selling expenses (associated with the sales representatives) incurred by Fanciful Fan for the month of June. Assume each of the representatives sold 30 fans in the month of June. $10,000 $14,500 $12,250 $2,250

$12,250

Multiple regression was run on these data; the coefficients shown by the regression program are as follows: Intercept$14,460 X variable1 8.92 X variable2 20.39 If Hydraulics Unlimited estimates that next month will have 430 total purchase orders and 45 nonstandard orders, what is the total estimated purchasing cost for that month? $19,213 $4,753 $3,836 $918

$19,213 Total purchasing cost = $14,460 + ($8.92 × Purchase orders) + ($20.39 × Non-standard orders). Total purchasing cost = $14,460 + $8.92(430) + $20.39(45) = $19,213

Foothill Hospital recorded the following costs for the meals served in its cafeteria during the last seven weeks: Meals served Cafeteria costs 1,500 $4,800 1,600 5,080 1,800 5,280 1,450 4,900 1,000 4,000 1,650 5,100 1,900 5,800 Using the high-low method, the total fixed costs for the cafeteria are $2,000. $1,000. $1,400. $1,800.

$2,000. 5800-4000=1800 1900-1000=900 1800/900=$2 $2x1900=3800 5800-3800=$2000

Which of the following statements is true regarding the role of cost behavior for forensic accounting? Cost estimations and income measurements cannot be used to resolve legal issues. Cost behavior can be used to determine if liability exists and, if it does, the total damages resulting from the liability. Cost behavior is the least frequently used accounting area for evaluating legal issues. Very few areas within accounting can play a role in forensic accounting situations.

Cost behavior can be used to determine if liability exists and, if it does, the total damages resulting from the liability. Cost behavior often is used in determining whether liability exists and, if so, the amount of damages resulting from such liability.

A coefficient of correlation value close to zero indicates no correlation. negative correlation. perfect correlation. positive correlation.

no correlation. Knowledge of the movement of one variable gives us no clue as to the movement of the other variable. A coefficient of correlation value close to zero indicates no correlation.

Hydraulics Unlimited had the following 12 months of data on purchasing costs and number of purchase orders. Month Purchasing Cost Number of Purchase Orders January $57,226 457 February 93,178 745 March 70,925 567 April 54,985 432 May 70,232 561 June 90,259 723 July 78,963 631 August 72,687 582 September 86,234 689 October 94,255 753 November 74,891 598 December 80,199 642 Using the high-low method, what is the variable rate for purchasing cost based on the number of purchase orders? (Round to the nearest whole dollar.) $150 $122 $102 $175

$122 94255 - 54985 = 39270 753 - 432 = 321 39270 / 321 = $122.33

Proton Company has six sales representatives and pays them a salary of $20,000 each per month. It also pays 10% commission on the sale price of each refrigerator. Each refrigerator is sold at a price of $10,000. Compute the total selling expenses (associated with the sales representatives) incurred by Proton for the month of August. Assume each of the representatives sold five refrigerators in the month of August. $120,000 $170,000 $180,000 $150,000

$150,000 20000 x 6 = 120000 10000 x .10 = 1000 (1000 x 6) x 5 = 30000 120000 + 30000 = 150000

Alpha Systems, Inc., manufactures computer keyboards. The data for the month of June are as follows: Direct materials per unit $10 Direct labor per unit $6 Variable overhead per unit $4 Supervisor's salary $25,000 Units produced 12,500 Calculate the variable cost per computer keyboard. $18 per keyboard $20 per keyboard $16 per keyboard $22 per keyboard

$20 per keyboard 10 x 12500 = 125000 6 x 12500 = 75000 4 x 12500 = 50000 125000+75000+50000 = 250000 250000 / 12500 = $20

HomeStyle Company has estimated overhead costs of $35,700 for the month of September. Ordering costs of $8,275 are included in this estimated overhead. The variable rate per order is $25. What is the total overhead cost if the number of orders has increased by 500 orders? $12,500 $39,925 $27,425 $8,455

$39,925 35700 - 8275 = 27425 500 x 25 = 12500 27425 + 12500 = 39925

Barium, Inc., ran a regression on the last 12 months of data on selling expenses. The selling expenses vary according to the number of orders placed by customers. The following data are available after regression analysis of selling expenses: Intercept $2,842 (rounded to the nearest dollar) X variable1 5.68 (rounded to the nearest cent) Barium wants to estimate the selling cost for the coming year and expects 4,800 customer orders. Determine the estimated total selling costs for the coming year. (Round answer to the nearest dollar.) $45,946 $34,104 $70,802 $61,368

$61,368 2842 x 12 = 34104 5.68 x 4800 = 27264 34104 + 27264 = 61368

HomeStyle Company makes Product X. The total time it took to manufacture the first unit of Product X was 65 hours. The applicable learning rate was 85%. Determine the time taken to manufacture the second unit of Product X using the incremental unit-time learning curve model. 55.25 hours 20 hours 9.75 hours 65.85 hours

55.25 hours hours x learning rate = time to manufacture 65 x .85 = 55.25

Jackson Assembly has 11 assemblers. Each assembler can process 19,000 orders in a year. Last year, 200,000 orders were processed. Determine the unused capacity in terms of the number of orders processed. 7,000 orders 13,000 orders 11,000 orders 9,000 orders

9,000 orders

Which of the following statements is true of multiple regression? Multiple regression is an extension of the method of industrial engineering method. The computations required for multiple regression are essentially the same as for a simple regression with one independent variable. Multiple regression is used to fit an equation involving two or fewer independent variables. Any practical application of multiple regression requires use of a computer.

Any practical application of multiple regression requires use of a computer. The computations required for multiple regression are far more complex than in simple (one independent variable) regression. Any practical application of multiple regression requires use of a computer.

Which of the following can significantly affect how accountants process information? Understanding of cost relationships Ability to use Excel Whether labor is a variable or fixed cost Cognitive heuristics and biases

Cognitive heuristics and biases

Which of the following can significantly affect how accountants process information? Ability to use Excel Understanding of cost relationships Whether labor is a variable or fixed cost Cognitive heuristics and biases

Cognitive heuristics and biases Psychological studies document how widespread powerful cognitive heuristics and biases can significantly affect how accountants process information, including various types of cost management data.

Which of the following states that the cumulative average time per unit decreases by a constant percentage each time the cumulative quantity of units produced doubles? Incremental unit-time learning curve model Industrial analysis model Cumulative average-time learning curve model Multiple regression model

Cumulative average-time learning curve model

Which of the following is an example of a unit-based activity driver? Direct labor hours Engineering change orders Inspection hours Material moves

Direct labor hours Unit-level drivers explain changes in cost as units produced change. Pounds of direct materials, kilowatt-hours used to run production machinery, and direct labor hours are examples of unit-based activity drivers.

Which of the following costs are, in total, constant within the relevant range while the level of the associated driver varies? Step-up cost Fixed cost Variable cost Opportunity cost

Fixed cost

Which of the following is an advantage of the scatterplot method of separating a mixed cost into its fixed and variable components? It requires only two data points to perform the analysis. It allows a cost analyst to inspect the data visually. It defines the coefficient of correlation accurately. It provides an objective criterion to choose the best-fitting line.

It allows a cost analyst to inspect the data visually.

Which of the following statements is true of the account analysis method of estimating costs? It can be used to estimate costs by classifying accounts in the general ledger as fixed, variable, or mixed. It is useful in determining the cost of manufactured items, where the process stays the same from unit to unit. It is most frequently used for manufacturing processes, where there is a direct link between materials and labor inputs with the output. It uses physical observation and analysis to determine what activities, in what amounts, are needed to complete a process.

It can be used to estimate costs by classifying accounts in the general ledger as fixed, variable, or mixed.

Which of the following statements is true of the account analysis method of estimating costs? It is useful in determining the cost of manufactured items, where the process stays the same from unit to unit. It is most frequently used for manufacturing processes, where there is a direct link between materials and labor inputs with the output. It uses physical observation and analysis to determine what activities, in what amounts, are needed to complete a process. It can be used to estimate costs by classifying accounts in the general ledger as fixed, variable, or mixed.

It can be used to estimate costs by classifying accounts in the general ledger as fixed, variable, or mixed.

Which of the following is an advantage of using managerial judgment to separate fixed and variable costs? It eliminates the need for advanced data analytics. It is very simple. It prohibits errors. The level of understanding that the manager has of the specific company does not come into play.

It is very simple.

When there are three independent variables, at least three points are needed to compute the parameters F, V 1, and V 2, which are plotted in three dimensions. Which of the following methods is the most practical to use in this situation? Multiple regression method Account analysis method Scatterplot method High-low method

Multiple regression method With three variables, using the scatterplot method or the high-low method is not practical. The extension of the method of least squares is straightforward and relatively simple to develop a set of equations that yields the best-fitting equation. Whenever least squares is used to fit an equation involving two or more independent variables, the method is called multiple regression.

Which of the following statements is true of the coefficient of correlation? If the coefficient of correlation is negative, then the two variables move together in the same direction. Perfect negative correlation would yield a coefficient of correlation of -1.00. It is the cube root of the coefficient of determination when there is one independent variable. It is an alternative measure of the hypothesis test of cost parameters.

Perfect negative correlation would yield a coefficient of correlation of -1.00.

Which of the following corresponds to the variable cost per unit of output? Slope parameter Dependent variable Intercept parameter Independent variable

Slope parameter

Which of the following statements is true of the coefficient of determination? There is no cut-off point for a good versus a bad coefficient of determination. The value of the coefficient of determination (R2) can range between -1 and +1. Perfect negative correlation would yield a coefficient of correlation of -1.00. The lower the percentage of cost variability explained, the better job the dependent variable does of explaining the independent variable.

There is no cut-off point for a good versus a bad coefficient of determination. While the closer R2 is to 1.00, the better, there is no cut-off point for a good versus a bad coefficient of determination.

Which of the following describes step-fixed costs? They are costs that follow a step-cost behavior with narrow steps. They are costs that follow a step-cost behavior with wide steps. They are the costs that have both a fixed and a step-cost component. They are costs that keep changing at all levels of step-cost activity.

They are costs that follow a step-cost behavior with wide steps.

Which of the following may be used in conjunction with the industrial engineering method? Accounts driven by machine hours Time and motion studies Purchase orders Experience

Time and motion studies

Y = F + V 1 X 1 + V 2X2, where X 1 = Number of sales initiated by representatives X 2 = Number of dispatches made F = Fixed cost component Y = Total selling costs Which of the following is a dependent component in the given equation? Fixed cost component Number of dispatches made Total selling cost Number of sales initiated by representatives

Total selling cost

Zeb Corporation has a manager with a deep and comprehensive understanding of the firm and its cost patterns. In this situation, the managerial judgment method would not be subject to the types of errors seen in the strict fixed/variable dichotomy. is unable to account for mixed costs. can give good results. would result in a useful level of complexity.

can give good results.

The percentage of variability in the dependent variable explained by an independent variable is called the coefficient of correlation. coefficient of determination. coefficient of variation. coefficient of regression.

coefficient of determination.

Area The industrial engineering method and the account analysis method are judgment-based methods of determining goodness of fit. activity capacity. cost behavior. practical capacity.

cost behavior.

The degree of association between cost and activity output is measured by goodness of fit. hypothesis test of cost parameters. confidence intervals. coefficient of variation.

goodness of fit.

A potential disadvantage of the high-low method is that it involves many calculations for determining costs. it gives different answers when more than one person works on a particular data set. it uses only two data points, which may not be representative of normal conditions. the results are very subjective.

it uses only two data points, which may not be representative of normal conditions.

Whenever least squares is used to fit an equation involving two or more independent variables, the method is called multiple regression. multiple correlation. correlation analysis. coordination analysis.

multiple regression.

The learning rate is determined through experience and assumes a constant 25%. must be between 50 and 100%. assumes a constant 80%. must be between 25 and 50%.

must be between 50 and 100%.

The capacity at which an activity is performed efficiently is called unused capacity. total capacity. practical capacity. achieved capacity.

practical capacity. When a firm acquires the resources needed to perform an activity, it obtains activity capacity. The amount of activity capacity needed corresponds to the level where the activity is performed efficiently. This efficient level of activity performance is called practical capacity.

The range over which the assumed cost relationship is valid for the normal operations of a firm is known as the complete range. average range. relevant range. normal range.

relevant range.

A function that shows a steady level of cost for an output range and then moves up to a higher level of cost, where it stays for another range of activity, is called a(n) step-cost function. regression function. coefficient of correlation function. intercept function.

step-cost function.

A function that shows a steady level of cost for an output range and then moves up to a higher level of cost, where it stays for another range of activity, is called a(n) step-cost function. intercept function. regression function. coefficient of correlation function.

step-cost function. A step-cost function displays a constant level of cost for a range of output and then jumps to a higher level of cost at some point, where it remains for a similar range of activity.

The hypothesis test of cost parameters indicates whether the parameters are within the boundaries of a firm. a correlation exists between fixed and variable costs. the total cost is similar to that of the prior periods. the parameters are different from zero.

the parameters are different from zero.

In the mixed cost formula, Total cost = Fixed cost + (Variable rate × Measure of output), the dependent variable in the formula is variable rate. fixed cost. total cost. output.

total cost. The dependent variable is a variable whose value depends on the value of another variable. In the mixed cost equation, total cost is the dependent variable; it is the cost that is predicted in the equation.