Question 1

Blaster, Inc. recently conducted a least-squares regression analysis to predict selling expenses. The company has constructed the following regression equation: Y = 329,000 + 7.80X. Which of the following statements is false if the primary cost driver is number of units sold?

Accepted Answer

The regression equation Y = 329,000 + 7.80X predicts selling expenses (Y) based on the number of units sold (X). Therefore, "X" represents the number of units sold, not the number of hours worked during the period.

Question 2

Vargis Corporation has a machining capacity of 200,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:
  
Vargis uses the high-low method to analyze cost behavior. 
Required: 
A. Classify each of the costs as being either variable, fixed, or semivariable.
B. Calculate amounts for the two unknowns in the preceding table.
C.
C. Calculate the total amount that Vargis would expect at a 75% utilization rate for Cost A, Cost B, and Cost
D. Develop an equation that Vargis can use to predict total cost for any level of hours within its range of operation.

Accepted Answer

The answer of Vargis Corporation has a machining capacity of...

Question 3

Tallequah, Inc. uses the high-low method to analyze cost behavior. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged $10.50 per hour. When activity jumped to 24,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $9.75. On the basis of this information, the company's fixed maintenance costs were:

Accepted Answer

The answer of Tallequah, Inc. uses the high-low method to...

Question 4

Use the following information to answer the following QuestionsSwan, Inc. uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40.
-On the basis of this information, the variable cost per machine hour for Swan was:

Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in total costs at the high and low activity levels and dividing by the difference in activity levels. Here, the difference in total costs is ($30.40 * 25,000) - ($33.40 * 22,000) and the difference in machine hours is 25,000 - 22,000. The variable cost per machine hour is $8.40.

Question 5

Bogata Enterprises has determined that three variables play a key role in determining company revenues. To arrive at an objective forecast of revenues for the next accounting period, Bogata should use:

Accepted Answer

Multiple regression is the appropriate statistical method for forecasting when there are multiple variables that influence the outcome. It allows for the analysis of the relationship between a dependent variable (in this case, company revenues) and two or more independent variables.

Question 6

Use the following information to answer the following QuestionsSwan, Inc. uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40.
-On the basis of this information, the fixed cost for Swan was:

Accepted Answer

The answer of Use the following information to answer the...

Question 7

Corrine Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?

Accepted Answer

In the given regression equation, Y = 495,000 + 5.65X, the constant term (495,000) represents the fixed manufacturing overhead, and the coefficient of X (5.65) represents the variable cost per unit of the cost driver, which in this case is machine hours. Therefore, "X" represents the number of machine hours, and the company anticipates $495,000 of fixed manufacturing overhead.

Question 8

A staff assistant at Warrington Corporation recently determined that the first five units completed in a new manufacturing process took 500 hours to complete, or an average of 100 hours per unit. The assistant also found that when the cumulative output produced doubles, the average labor time declines by 20%. On the basis of this information, how many total hours would Warrington use if it produces a cumulative amount of 40 units?

Accepted Answer

The learning curve effect indicates that when output doubles, the average time per unit decreases by 20%. Starting with 100 hours per unit for the first 5 units, the average time for the next 5 units (10 units total) is 80 hours per unit. This pattern continues, and by calculating the total hours for each doubling (5, 10, 20, 40 units), the total hours for 40 units is 2,048.

Question 9

The following data relate to the Torrence Company for May and August:

-
May and August were the lowest and highest activity levels, and Torrence uses the high-low method to analyze cost behavior. If maintenance hours are estimated to be 26,000 hours in October, which of the following statements is true?

Accepted Answer

The answer of The following data relate to the Torrence...

Question 10

Rushmont, Inc. operates a small package delivery service in the Nashville suburbs. If the company uses a regression equation to forecast total operating costs, the coefficient of the equation's independent variable would correspond to the:

Accepted Answer

The coefficient of the independent variable in a regression equation used to forecast total operating costs represents the variable operating cost per delivery. This is because the coefficient reflects how much the dependent variable (total operating costs) changes with a one-unit change in the independent variable (number of deliveries), which directly corresponds to the variable cost per delivery.

Question 11

Which of the following tools is not associated with cost estimation?

Accepted Answer

Inversion equations are not typically associated with cost estimation. Cost estimation often involves techniques that predict the cost of a project or product based on various factors and historical data. Least-squares regression, multiple regression, time and motion studies, and learning curves are all methods used to estimate costs by analyzing past performance and predicting future costs. Inversion equations, on the other hand, are mathematical tools used to solve for unknown variables in equations, and they do not directly relate to the process of cost estimation.

Question 12

The following data relate to the Torrence Company for May and August of the current year:

-
May and August were the lowest and highest activity levels, and Torrence uses the high-low method to analyze cost behavior. Which of the following statements is true?

Accepted Answer

The answer of The following data relate to the Torrence...

Question 13

Trey, Inc. is studying marketing cost and sales volume, and has generated the following information by use of a scatter diagram and a least-squares regression analysis:

Trey is now preparing an estimate for monthly sales of 18,000 units. On the basis of the data presented, compute the most accurate sales forecast possible.

Accepted Answer

The answer of Trey, Inc. is studying marketing cost and...

Question 14

The following selected data were taken from the accounting records of Colorado Enterprises:

Accepted Answer

The answer of The following selected data were taken from...

Question 15

Rolling Hills Bistro produces one of the best sausage products in Tennessee. The company's controller compiled the following information by analyzing the accounting records:
1. Meat costs the company $3.25 per pound of sausage produced.
2. Compensation of production employees is $2.25 per pound of sausage produced.
3. Supervisory salaries total $23,000 per month.
4. The company incurs utility costs of $9,000 per month plus $0.35 per pound of sausage produced.
5. Insurance and property taxes average $6,400 per month.
Required: 
A. Classify each cost as variable, fixed, or semivariable.
B. Write a formula to express the behavior of the firm's production costs. (Use the form Y = a + bX, where X denotes the quantity of sausage produced.)

Accepted Answer

The answer of Rolling Hills Bistro produces one of the...

Question 16

Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows.
  
Lichtenstein anticipates producing 5,000 units in August, each unit requiring 1.5 hours of machine time. The company uses the high-low method to analyze costs. 
Required: 
A. Calculate the variable and fixed components of the utilities cost.
B. Using the data calculated above, estimate the utilities cost for August.
C. Compare the high-low method versus the visual-fit method with respect to (1) number of data observations used in the analysis and (2) objectivity of the results.

Accepted Answer

The answer of Lichtenstein Imports needs to determine the variable...

Question 17

Which of the following is not an issue in the collection of data for cost estimation?

Accepted Answer

All of the options listed (outliers, missing data, mismatched time periods, and inflation) are indeed issues that can affect the accuracy and reliability of cost estimation data collection. Each of these factors can introduce errors or biases into the estimation process, making it crucial to address them to ensure accurate cost predictions.

Question 18

Cheyenne Corporation operates a small medical lab in Wyoming that conducts minor medical procedures (including blood tests and x-rays) for a number of doctors. The lab consumes various medical supplies and is staffed by two technicians, both of whom are paid a monthly salary. In addition, there is an on-site office manager who is also paid by the month.
Required: 
A. If the lab's patient count increases by 15%, will the lab's total operating costs increase by 15%? Explain.
B. Cheyenne is considering opening an additional lab in a new suburban medical building. What will likely happen to the lab's level of fixed cost incurrence? Why?
C. What analysis methods would be available to the office manager and/or Cheyenne management if a close look at the lab's cost behavior is desired?

Accepted Answer

The answer of Cheyenne Corporation operates a small medical lab...

Question 19

The following data relate to the Torrence Company for May and August:

-
May and August were the lowest and highest activity levels, and Torrence uses the high-low method to analyze cost behavior. If maintenance hours are estimated to be 26,000 hours in October, which of the following statements is true?

Accepted Answer

The high-low method calculates variable cost per unit and fixed costs using the highest and lowest activity levels. Using these, the total cost for 26,000 hours can be calculated, resulting in $1,193,000.

Question 20

Use the following information to answer the following QuestionsSwan, Inc. uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40.
-On the basis of this information, what were total maintenance costs when Swan experienced 23,000 machine hours?

Accepted Answer

The answer of Use the following information to answer the...

Quiz 6: Activity Analysis, Cost Behavior, and Cost Estimation

Blaster, Inc. recently conducted a least-squares regression analysis to predict selling expenses. The company has constructed the following regression equation: Y = 329,000 + 7.80X. Which of the following statements is false if the primary cost driver is number of units sold?

Bogata Enterprises has determined that three variables play a key role in determining company revenues. To arrive at an objective forecast of revenues for the next accounting period, Bogata should use:

Corrine Corporation, which uses least-squares regression analysis, has derived the following regression equation for estimates of manufacturing overhead: Y = 495,000 + 5.65X. Which of the following statements is true if the primary cost driver is machine hours?

Rushmont, Inc. operates a small package delivery service in the Nashville suburbs. If the company uses a regression equation to forecast total operating costs, the coefficient of the equation's independent variable would correspond to the:

Which of the following tools is not associated with cost estimation?

The following data relate to the Torrence Company for May and August of the current year: - May and August were the lowest and highest activity levels, and Torrence uses the high-low method to analyze cost behavior. Which of the following statements is true?

The following selected data were taken from the accounting records of Colorado Enterprises:

Which of the following is not an issue in the collection of data for cost estimation?