Question 1

The cost formula that expresses the behavior of Yang's total cost is:
A)Y = $0 + $17X.
B)Y = $20,000 + $13X.
C)Y = $40,000 + $9X.
D)Y = $45,000 + $4X.
E)Y = $60,000 + $5X.

Accepted Answer

The answer of The cost formula that expresses the behavior...

Question 2

Wesley 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,Wesley should use:
A)simple regression.
B)multiple regression.
C)a scatter diagram.
D)complex regression.
E)the high-low method.

Accepted Answer

Since there are three key variables, simple regression would not be appropriate as it only takes into account a single variable. A scatter diagram may be helpful to visualize the relationship between the variables, but it would not provide an objective forecast. The high-low method can only estimate the relationship between two variables, so it would not be appropriate for this situation. Complex regression is not a commonly used term and may refer to a variety of techniques, so it is not a clear choice. Therefore, multiple regression would be the best choice as it can analyze the relationship between multiple variables and produce an objective forecast of revenues.

Question 3

A high R² measure in regression analysis is preferred because: A)it indicates a good fit of the regression line through the data points. B)it shows that a great deal of the change in the dependent variable is explained by change in the independent variable. C)it means that the independent variable is a good predictor of the dependent variable. D)it means that the cost analyst can be relatively confident in his or her cost predictions. E)all of the preceding statements are truE.

Accepted Answer

A high R² measure in regression analysis indicates that the regression line fits well with the data points, a large portion of the changes in the dependent variable can be attributed to the independent variable, and the independent variable serves as a good predictor of the dependent variable. Therefore, the cost analyst can be relatively sure of his or her cost predictions. All of these statements are true, making answer choice E the correct option.

Question 4

Temperance,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: 
Temperance 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.
A)$159,500.
B)$162,000.
C)$164,900.
D)$167,400.
E)An amount other than those listed abovE.

Accepted Answer

Using the regression equation generated by the scatter diagram, we can estimate the monthly sales for 18,000 units as follows:
Sales = 10897.5 + (2.48 × 18000)
Sales = 10897.5 + 44640
Sales = $164,900
Therefore, the most accurate sales forecast possible is $164,900, which is answer choice C.

Question 5

Ai Corporation extracts ore for eight different companies in Colorado.The firm anticipates variable costs of $65 per ton along with annual fixed overhead of $840,000,which is incurred evenly throughout the year.These costs exclude the following semivariable costs,which are expected to total the amounts shown for the high and low points of ore extraction activity:
March (850 tons): $39,900
August (1,300 tons): $46,200
A-1 uses the high-low method to analyze cost behavior.
Required:
A.Calculate the semivariable cost for an upcoming month when 875 tons will be extracted.
B.Calculate the total cost for that same month.
C.1.Step-fixed.
2.No.Notice that the bill will be $70,000 for A-1's tonnage,and the company could have Cortez haul up to 1,099 tons for the same cost.Ideally,Ai should try to move to the right side of the step to get a better return on its investment.
C.Ai uses Cortez Trucking to haul extracted ore.Cortez's monthly charges are as follows:
  
1.From a cost behavior perspective,what type of cost is this?
2.If Ai plans to extract 875 tons,is the company being very "cost effective" with respect to Cortez's billing rates? Briefly discuss.

Accepted Answer

The answer of Ai Corporation extracts ore for eight different...

Question 6

Mohammed Products has determined that the number of machine hours worked (MH)drives the amount of manufacturing overhead incurred (MOH).On the basis of this relationship,a staff analyst has constructed the following regression equation:
MOH = 240,000 + 8MH
Which of the choices correctly depicts the nature of Mohammed's variables? 
A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Accepted Answer

The answer of Mohammed Products has determined that the number...

Question 7

Booster,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?
A)The company anticipates $329,000 of fixed selling expenses.
B)"Y" represents total selling expenses.
C)The company expects both variable and fixed selling expenses.
D)For each unit sold,total selling expenses will increase by $7.80.
E)"X" represents the number of hours worked during the period.

Accepted Answer

The regression equation suggests that the primary cost driver is the variable X, which represents the number of units sold. Therefore, statement E is false as X does not represent the number of hours worked during the period.

Question 8

Around Town,Inc.operates a small package delivery service in the Columbus suburbs.If the company uses a regression equation to forecast total operating costs,the equation's intercept would correspond to the:
A)variable operating cost per delivery.
B)fixed operating costs.
C)number of deliveries.
D)total variable operating costs.
E)total operating costs.

Accepted Answer

The intercept in a regression equation represents the fixed cost component, which does not change based on the number of deliveries. The variable cost per delivery would be represented by the slope coefficient in the equation. The number of deliveries is not directly represented in the equation, but can be used as a predictor variable to forecast total operating costs. The total variable operating costs would be the variable cost per delivery multiplied by the number of deliveries. Therefore, the best choice is B, fixed operating costs.

Question 9

Package Express,Inc.operates a small package delivery service in the Jacksonville 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:
A)variable operating cost per delivery.
B)fixed operating costs.
C)number of deliveries.
D)total variable operating costs.
E)total operating costs.

Accepted Answer

The answer of Package Express,Inc.operates a small package delivery service...

Question 10

The cost types shown above are identified by behavior as: 
A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Accepted Answer

The answer of The cost types shown above are identified...

Question 11

Chesley 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?
A)Total manufacturing overhead is represented by the variable "X."
B)The company anticipates $495,000 of fixed manufacturing overhead.
C)"X" is commonly known as the dependent variable.
D)"X" represents the number of machine hours.
E)Both "B" and "D" are truE.

Accepted Answer

The equation Y = 495,000 + 5.65X indicates that $495,000 is the fixed manufacturing overhead (B), and "X" represents the number of machine hours, which is the primary cost driver (D).

Question 12

Which of the following tools is not associated with cost estimation?
A)Least-squares regression.
B)Multiple regression.
C)Inversion equations.
D)Time and motion (engineering)studies.
E)Learning curves.

Accepted Answer

Inversion equations are used in geology and geophysics to estimate the properties of subsurface rocks and fluids, and are not typically used in cost estimation. The other tools listed are commonly used in cost estimation.

Question 13

Which of the following is not an issue in the collection of data for cost estimation?
A)Outliers.
B)Missing data.
C)Mismatched time periods.
D)Inflation.
E)All of these are issues in data collection.

Accepted Answer

All the options listed are common issues encountered in the collection of data for cost estimation.

Question 14

Southbend Medical Clinic offers a number of specialized medical services.A review of data for the year just ended revealed variable costs of $32 per patient day;annual fixed costs of $480,000,which are incurred evenly throughout the year;and semivariable costs that displayed the following behavior at the "peak" and "valley" of activity:
January (2,400 patient days): $258,400
August (2,900 patient days): $278,900
Required:
A.Analysis of semivariable cost (variable portion):
($278,900 - $258,400)/ (2,900 - 2,400)= $41 per patient day
  
A.Calculate the total cost for an upcoming month (2,800 patient days)if current cost behavior patterns continue.Southbend uses the high-low method to analyze cost behavior.
B.No.The "peak" and "valley" of operation were 2,900 patient days and 2,400 patient days,respectively.The 3,800-patient-day data point is well outside this range of observed cost relationships and recent activity (i.e. ,the relevant range).Costs can change outside of this range (e.g. ,fixed costs may be higher),and the lack of past experience will likely create unknowns for the analyst.
B.There is a high probability that Southbend's volume will increase in forthcoming months as patients take advantage of new scientific advances.Can the data and methodology used in part (a)for predicting the costs of 2,800 patient days be employed to estimate the costs for,say,3,800 patient days? Why or why not?

Accepted Answer

The answer of Southbend Medical Clinic offers a number of...

Question 15

The following data relate to the Lisle Company for May and August of the current year: 
May and August were the lowest and highest activity levels,and Lisle 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?
A)Total maintenance costs will be $1,175,000.
B)Total maintenance costs will be $1,182,000.
C)Total maintenance costs will be $1,193,000.
D)Total maintenance costs will be $1,221,000.
E)Total maintenance costs will be $1,247,000.

Accepted Answer

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

Question 16

A staff assistant at Whitmere Corporation recently determined that the first four units completed in a new manufacturing process took 800 hours to complete,or an average of 200 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 Washington use if it produces 16 units?
A)128.
B)160.
C)1,280.
D)2,048.
E)An amount other than those listed abovE.

Accepted Answer

The learning curve effect indicates that when cumulative output doubles, the average time per unit decreases by 20%. Starting with 200 hours per unit for the first 4 units, the average time per unit for the next 4 units (8 units total) is 160 hours, then 128 hours for the next 8 units (16 units total). Calculating total hours: 4 units x 200 hours + 4 units x 160 hours + 8 units x 128 hours = 2,048 hours.

Question 17

If Yang produces 10,000 units,the total cost would be:
A)$90,000.
B)$100,000.
C)$110,000.
D)$125,000.
E)an amount other than those given abovE.

Accepted Answer

The answer of If Yang produces 10,000 units,the total cost...

Question 18

Compare and contrast the following types of costs: (1)variable and step-variable and (2)fixed and step-fixed.

Accepted Answer

The answer of Compare and contrast the following types of...

Question 19

In regression analysis,the variable that is being predicted is known as the:
A)independent variable.
B)dependent variable.
C)explanatory variable.
D)interdependent variable.
E)functional variablE.

Accepted Answer

The dependent variable is the variable that is being predicted, and it is the variable that is affected by the independent variable(s).

Question 20

Sunshine Valley Meat Company produces one of the best sausage products in Pennsylvania.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.1.Variable
2.Variable
3.Fixed
4.Semivariable
5.Fixed
A.Classify each cost as variable,fixed,or semivariable.
B.
  
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 Sunshine Valley Meat Company produces one of...

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

The cost formula that expresses the behavior of Yang's total cost is:

Wesley 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,Wesley should use:

A high R2 measure in regression analysis is preferred because:

Booster,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?

Around Town,Inc.operates a small package delivery service in the Columbus suburbs.If the company uses a regression equation to forecast total operating costs,the equation's intercept would correspond to the:

Package Express,Inc.operates a small package delivery service in the Jacksonville 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:

The cost types shown above are identified by behavior as:

Chesley 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?

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

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

If Yang produces 10,000 units,the total cost would be:

Compare and contrast the following types of costs: (1)variable and step-variable and (2)fixed and step-fixed.

In regression analysis,the variable that is being predicted is known as the:

A high R² measure in regression analysis is preferred because: