Cost Accounting Ch 5

In a month where the company expects to use 300 machine-hours, what are total expected costs using the account analysis method? Fixed costs per month $6,000 Variable cost per machine hour $15 Expected labor hours 200

$10,500

Which of the following is not true of regression analysis?

It is costly to perform.

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

scattergraph

Costs that change proportionately with activity levels are

variable costs

The slope of the line on a scattergraph represents the estimated

variable costs per unit

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

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

Given the following information, calculate total estimated cost using the account analysis method. Fixed costs per month $3,000 Variable cost per machine hour $10 Machine hours 200

5,000

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 Relies on past experience Details each step of the operation Relies on statistical analysis

Does not require prior data Details each step of the operation

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

Engineering estimates Account analysis Statistical analysis

Which of the following statements are true? Account analysis allows for random events to be separated from the underlying relation between costs and activities. Engineering estimates often omit inefficiencies such as downtime. 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. Account analysis is often based on last period's costs. Statistical cost estimation can deal with both random and unusual events.

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

Engineering method

Which of the following are true of the engineering method? It can be used to estimate costs for totally new activities. It can detail each step required to perform an operation. It calls for a review of each account making up the total cost being analyzed. It allows for random events to be separated from the underlying relation between costs and activities.

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

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 regression analysis output? The intercept term in a regression analysis must be interpreted with caution. For cost estimation purposes, the intercept term is an estimate of variable costs. The intercept at zero activity is outside of the relevant range of observations. For cost estimation purposes, the slope of the cost line is an estimate of fixed costs.

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

Which of the following are true of regression results? They can be used to test whether a particular factor is related to cost. They can be used to test for cost drivers. They can only be used to estimate fixed costs. They are error-free.

They can be used to test whether a particular factor is related to cost. They can be used to test for cost drivers.

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

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

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

account analysis method

The most important step in obtaining regression estimates for cost estimation is to establish the existence of a logical relationship between activities and cost to be estimated direct and indirect costs to be estimated the independent and dependent variables

activities and cost to be estimated the independent and dependent variables

R-squared (R2) is also called the

coefficient of determination

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

correlation coefficient

TC = F + VX is called the

cost equation

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

fixed costs

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

high low cost estimation

A key step in the account analysis method is to

identify the relationship between the activity and the cost

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

increases

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

independent variable

When using the general methods to estimate cost behavior, Blank______. Multiple select question. it is a good idea to use multiple methods so results can be compared managers often apply their own best judgment as a first step in the estimation process large differences in methods suggest that the cost cannot be estimated results are likely to differ from method to method

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

Account analysis relies heavily on personal judgment which

may be an advantage or disadvantage

Account analysis does not include

modeling and analyzing variables

Activities measured by complexity can use cost drivers that include

number of different products number of components

The most commonly used regression technique is

ordinary least squares

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

regression

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

relevant range

Account analysis ______. identifies where slack exists in a company's operations relies heavily on personal judgment is an objective way to estimate costs is a useful way to estimate costs

relies heavily on personal judgment is a useful way to estimate costs

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

scattergraph

When using ordinary least squares regression,

the inclusion of outliers can significantly affect the results

A common rule of thumb for scattergraphs is to use

three year(s) of monthly data if the physical processes have not changed significantly within that time.

The number of observations to include in a scattergraph depend on all the following except

tolerance for error

The intercept of the line on a scattergraph represents an estimate of the

total fixed costs

Statistical cost estimation ______. is subject to managers focusing on specific issues of the previous period that may not be relevant uses several periods or locations as the basis for estimating cost relations deals with both random and unusual events often omits inefficiencies such as downtime for unscheduled maintenance

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