Question 1

In evaluating the economic plausibility of a regression model, the analyst is determining
A) the statistical significance of the relationship of the independent variable, X with the dependent variable, Y.
B) whether the chosen independent variable, X, is a viable, sensible predictor of the dependent variable, Y, using judgment and understanding of cause-and-effect relationships.
C) the degree to which the regression line fits the actual observations.
D) the correlation of variable costs to fixed costs in the total cost line determination.

Accepted Answer

The economic plausibility of a regression model involves assessing whether the independent variable is a sensible predictor of the dependent variable based on judgment and understanding of cause-and-effect relationships.

Question 2

In using a regression method, and determining the statistical significance of the slope of the cost line, the larger the t-statistic,
A) the stronger or more significant the relationship between the independent variable, X and the dependent variable, Y.
B) the weaker or less significant the relationship between the independent variable, X and the dependent variable, Y.
C) the more relevant the intercept is in the cost equation.
D) the less relevant the intercept is in the cost equation.

Accepted Answer

A larger t-statistic indicates a stronger evidence against the null hypothesis, suggesting a more significant relationship between the independent variable and the dependent variable.

Question 3

The fixed portion of the cost equation is called the
A) p value.
B) Intercept coefficient.
C) t statistic.
D) standard deviation.

Accepted Answer

The fixed portion of the cost equation is called the intercept coefficient.

Question 4

Which of the following is not an assumption of the regression method?
A) Abnormality of the residuals
B) Independence of the residuals
C) Constant variance of the residuals
D) Linearity

Accepted Answer

The assumption of regression methods includes normality, independence, constant variance (homoscedasticity) of the residuals, and linearity of the relationship between the independent and dependent variables. Abnormality of the residuals is not an assumption.

Question 5

What is meant by a multiple regression?
A) The same variables (both independent and dependent) are simply run multiple times in the same regression to ensure statistical significance.
B) The same regression is run as was previously run, but with multiple independent variables (X) to estimate one cost function.
C) The same regression is run with the same variables, but with supporting analyses such as account analysis and high-low method.
D) The use of the same regression run multiple times to eliminate the need for the evaluation criteria for the validity of the input and output.

Accepted Answer

Multiple regression involves using multiple independent variables to predict the value of a dependent variable, allowing for a more comprehensive analysis of the relationships between variables.

Question 6

When evaluating the output of a multiple regression model, one needs to check
A) the validity of the entire model using the criteria of economic plausibility, goodness of fit, and significance of slope.
B) the validity of the entire model using the criteria of economic plausibility only since the goodness of fit and significance of slope validity have been addressed in the multiple regression runs of data.
C) the validity of the last data set run using the criteria of economic plausibility, goodness of fit, and significance of slope.
D) the validity of the model using the first and last set of data run using the criteria of economic plausibility, goodness of fit, and significance of slope.

Accepted Answer

Evaluating a multiple regression model involves checking economic plausibility, goodness of fit, and significance of slope to ensure the model is valid and reliable.

Question 7

The essence of the learning curve is that
A) as the number of units of output increases, the labor hours per unit increase in a corresponding, observable, linear relationship.
B) as the number of units of output decreases, the labor hours per unit decline in a corresponding, observable, linear relationship.
C) as the number of units of output increases, the labor hours per unit decline in a corresponding, observable, nonlinear relationship.
D) as the number of units of output decreases, the labor hours per unit increase in a corresponding, observable, nonlinear relationship.

Accepted Answer

The learning curve theory suggests that as production increases, workers become more efficient, leading to a decrease in labor hours per unit in a nonlinear fashion.

Question 8

Greta's Gadgets has a learning curve of 90%. The time observed to complete the first gadget was 1 hour (60 minutes). What is the expected time to complete the 5^th unit assuming the learning curve of 90%? A) 36.3 minutes B) 47.98 minutes C) 48.6 minutes D) 54 minutes

Accepted Answer

Unit #2: 60 min. x (2^-.152) = 54 min.; Unit #3: 60 min. x (3^-.152) = 50.8 min.; Unit #4: 60 min. x (4^-.152) = 48.6 min.; Unit #5: 60 min. x (5^-.152) = 47.98 min.

Question 9

If one were to apply a linear cost function to labor, the implication would be that
A) the time to make an additional unit increases over time.
B) the time to make each additional unit decreased over time.
C) each unit requires the same amount of time to produce.
D) there is an inverse relationship between cost and the cost driver.

Accepted Answer

A linear cost function implies that the cost per unit is constant, meaning each unit requires the same amount of time to produce.

Question 10

The learning curve approach assumes a
A) linear cost function.
B) nonlinear cost function.
C) that each unit will take the same amount of time to produce.
D) regardless of training, production time per unit cannot be reduced.

Accepted Answer

The learning curve approach assumes a nonlinear cost function, as it reflects the decrease in time or cost per unit with increased production due to learning and efficiency improvements.

Question 11

In applying a linear cost approach as compared to a nonlinear approach results in
A) labor costs being higher.
B) labor costs being lower.
C) labor costs being the same.
D) operating income being higher.

Accepted Answer

The answer of In applying a linear cost approach as...

Question 12

Chandra Corporation has an observed and documented a learning curve of 90%, and production of units has increased from 10 to 20 units per week. If it is known that it takes 60 minutes to produce the 10^th unit, what amount of time will it take to product the 20^th unit? A)45 minutes B)50 minutes C)54 minutes D)60 minutes

Accepted Answer

Since the number of units produced doubled, then the 90% is applied to the original 60 minutes (.90 x 60) = 54 minutes to complete the 20^th unit.

Question 13

Which of the following statements is true regarding the concept of a learning curve?
A) As additional units are produced, it will require the same amount of time, but cost per unit will decrease.
B) As additional units are produced, each additional unit will require less time, and thus, will result in cost savings.
C) As additional units are produced, the amount of time required may increase or decrease depending on the training of the production worker.
D) As additional units are produced, each additional unit will require less time, but the cost will increase per unit due to increased training costs for the production worker.

Accepted Answer

The learning curve concept suggests that as more units are produced, workers become more efficient, reducing the time and cost per unit.

Question 14

Which of the following is the ultimate limitation of the concept of a learning curve?
A) It typically requires additional training and education of production workers.
B) Innovation such as when a company creates a new product or production process, the learning curve requires a new learning curve to be started.
C) It cuts operating costs by saving time.
D) It improves skill improvement and learning for production employees.

Accepted Answer

The ultimate limitation of a learning curve is that it assumes a stable process. When innovation occurs, such as the introduction of a new product or process, the existing learning curve becomes obsolete, and a new learning curve must be established.

Question 15

You and another company are currently bidding on a construction project. Your competitor is an experienced construction company with an observed learning curve of 90%. You are a new company with no observed learning curve. Assuming the company with the lowest bid will be granted the contract and both companies determined their bid based on a 40% markup on cost, who will most likely get the construction contract?
A) You will get the contract since you are new and most likely offered a low bid.
B) Your competitor will most likely get the bid since its costs are probably lower than those of a new company because of the learning curve of 90%.
C) Each company is equally likely to receive the contract since a learning curve does not affect costs or the related contract pricing.
D) Not enough information is given to make this determination.

Accepted Answer

Your competitor will most likely get the bid since their 90% learning curve suggests they can reduce costs over time, allowing them to offer a lower bid compared to a new company without a learning curve advantage.

Question 16

If a company was to plot its learning curve on a graph with the time per unit and number of units on each axis, one would expect the curve to be
A) downward sloping.
B) upward sloping.
C) a horizontal straight line.
D) a vertical straight line.

Accepted Answer

A learning curve typically shows that as more units are produced, the time per unit decreases due to increased efficiency and learning, resulting in a downward sloping curve.

Question 17

When computing the time required for the production of each additional unit with a learning curve, one would
A) multiply the time to produce the immediately preceding unit by the learning curve percentage.
B) divide the time of the immediately preceding unit by the learning curve percentage.
C) multiply the time to produce one unit by the cumulative number of units at this point by the learning rate [ln learning rate %/ ln 2]
D) divide the time of the immediately preceding unit by the one minus the learning curve percentage.

Accepted Answer

The learning curve effect suggests that each time production doubles, the time required per unit decreases by a constant percentage. Therefore, to find the time for the next unit, you multiply the time for the previous unit by the learning curve percentage.

Question 18

Which of the following methods would be the most comprehensive and reliable predictor of future costs for linear cost functions?
A) Account analysis method.
B) High-low method.
C) Regression method.
D) Learning curve method.

Accepted Answer

The regression method is the most comprehensive and reliable predictor of future costs for linear cost functions as it uses statistical techniques to estimate the relationship between variables, providing a more accurate and detailed analysis compared to other methods.

Question 19

Alpine Corporation has been manufacturing the same model of snowboards for several years. The original time to produce one snowboard was 2 hours (120 minutes). Over the last year, the production line has steam-lined the production process with a learning curve of 80%. Recently, the company has introduced a new model of snowboard which now requires 3 hours of production time, but with a 90% learning curve. How much time will it take to produce the third unit of the new snowboard?
A) 146 minutes
B) 152 minutes
C) 162 minutes
D) 180 minutes

Accepted Answer

Unit #1: 180 min. x 1 = 180 min.; Unit #2: 180 min x (2^-.152) = 162 min.; Unit #3: 180 min. x (3^-.152) = 152 min. The old learning curve is no longer used given the newer model.

Question 20

Futuristic Fashions reports the following cost information for the period:  Determine the linear cost function equation of a line using the data provide for Futuristic Fashions.

Accepted Answer

The answer of Futuristic Fashions reports the following cost information...

Quiz 3: Cost Behavior and Estimation

In evaluating the economic plausibility of a regression model, the analyst is determining

In using a regression method, and determining the statistical significance of the slope of the cost line, the larger the t-statistic,

The fixed portion of the cost equation is called the

Which of the following is not an assumption of the regression method?

What is meant by a multiple regression?

When evaluating the output of a multiple regression model, one needs to check

The essence of the learning curve is that

Greta's Gadgets has a learning curve of 90%. The time observed to complete the first gadget was 1 hour (60 minutes) . What is the expected time to complete the 5^th unit assuming the learning curve of 90%?

If one were to apply a linear cost function to labor, the implication would be that

The learning curve approach assumes a

In applying a linear cost approach as compared to a nonlinear approach results in

Chandra Corporation has an observed and documented a learning curve of 90%, and production of units has increased from 10 to 20 units per week. If it is known that it takes 60 minutes to produce the 10^th unit, what amount of time will it take to product the 20^th unit?

Which of the following statements is true regarding the concept of a learning curve?

Which of the following is the ultimate limitation of the concept of a learning curve?

If a company was to plot its learning curve on a graph with the time per unit and number of units on each axis, one would expect the curve to be

When computing the time required for the production of each additional unit with a learning curve, one would

Which of the following methods would be the most comprehensive and reliable predictor of future costs for linear cost functions?

Futuristic Fashions reports the following cost information for the period: Determine the linear cost function equation of a line using the data provide for Futuristic Fashions.