Question 1

Which of the following statements regarding the learning phenomenon is true?
A)The more units that are produced,the greater the average time to produce a single unit.
B)The relationship between number of units produced and the marginal time to produce the latest unit is linear.
C)Total labor cost is a linear function of the total units produced.
D)As production doubles,the time to produce the latest unit decreases.

Accepted Answer

This statement is known as the "learning curve effect." As production doubles, the time to produce the latest unit decreases. This is because workers become more efficient as they gain experience and repeat the same task multiple times. This results in a decrease in the marginal time to produce each additional unit. Therefore, option D is the correct statement. Option A is incorrect because as workers become more experienced, the average time to produce a single unit decreases. Option B is incorrect because the relationship between the number of units produced and the marginal time to produce the latest unit is not linear. Option C is incorrect because total labor cost is not necessarily a linear function of the total units produced, as it can be affected by factors such as wage rates and productivity levels.

Question 2

A cost driver is defined as: (CMA adapted)
A)the largest cost in a manufacturing process.
B)a fixed cost that cannot be avoided.
C)the significant factor in developing a new product.
D)an indirect cost that cannot be traced to a particular cost objective but is essential to the business.
E)a causal factor that increases the total cost of a cost objective.

Accepted Answer

A cost driver is a factor that causes or influences the cost of a particular cost objective, such as a product or service. It is a causal factor that increases the total cost of the cost objective. For example, in a manufacturing process, the number of units produced may be a cost driver as it affects the total cost of production. Therefore, choice E is the best answer.

Question 3

The Business School at Eastern College is accumulating data as a first step in the preparation of next year's budget development.One cost that is being looked at closely is administrative costs as a function of student credit hours.Data on administrative costs and credit hours for the past thirteen months are shown below:  The controller's office has analyzed the data and has given you the results from the regression analysis:  The percent of the total variance that can be explained by the regression is:
A)93.3%.
B)87.1%.
C)85.9%.
D)96.6%.

Accepted Answer

The R-squared value in the regression analysis is 0.871, which means that the regression model explains 87.1% of the total variation in administrative costs as a function of student credit hours. Therefore, the best choice is B.

Question 4

Hawkins Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: How much time will be needed to complete the 8^th unit? A)74.00 hours. B)57.80 hours. C)56.00 hours. D)49.13 hours.

Accepted Answer

Using the formula for the learning curve:
Y = a * X^b
where Y is the time to complete a unit, X is the number of units completed, a and b are constants.
Using the given information, we have:
11 = a * 1^b
20 = a * 2^b
Solving for a and b, we get:
a = 11
b = log(20/11)/log(2) = 0.678
Using this formula for completion of the 8th unit, we get:
Y = 11 * 8^0.678 = 49.13 hours. 
Therefore, the best choice is D.

Question 5

Thul Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow:  Based on the results of the high-low analysis,the estimate of electricity costs in a month with 2,200 machine hours would be:
A)$15,375.
B)$22,825.
C)$15,180.
D)$16,427.

Accepted Answer

The answer of Thul Company is interested in establishing the...

Question 6

In the learning curve equation Y = aX^b,the X term represents: A)the labor time required to produce the first unit. B)the labor time required to produce the last single unit. C)the cumulative number of units. D)the index of learning.

Accepted Answer

The X term in the learning curve equation represents the cumulative number of units produced.

Question 7

Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of the material handled? (CPA adapted)
A)Economic order quantity analysis.
B)Probability analysis.
C)Correlation analysis.
D)Multiple regression analysis.

Accepted Answer

Multiple regression analysis is the best choice as it can analyze the relationship between multiple independent variables (number of shipments and weight of material) and a dependent variable (inventory warehouse cost). This analysis can quantify how much of the variance in inventory warehouse costs can be attributed to the number of shipments and the weight of the material handled.

Question 8

Thul Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow:  If the controller uses the high-low method to estimate costs,the variable cost per machine hour is:
A)$6.25.
B)$6.90.
C)$5.77.
D)$11.70.

Accepted Answer

The answer of Thul Company is interested in establishing the...

Question 9

Thul Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow:  If the controller uses the high-low method to estimate costs,the cost equation for electricity cost is:
A)Cost = $3,726.88 + $5.77 × Machine-hours.
B)Cost = $1,625.00 + $6.25 × Machine-hours.
C)Cost = $6.90 × Machine-hours.
D)Cost = $22,825.

Accepted Answer

The high-low method involves using the highest and lowest activity levels and costs to estimate the variable cost per unit of activity. In this case, the highest level of machine hours is 5,000 and the lowest is 2,000, with corresponding costs of $38,000 and $16,500, respectively. 
Using these values, we can calculate the variable cost per machine hour:

Variable cost per machine hour = (Highest cost - Lowest cost) / (Highest activity - Lowest activity)
Variable cost per machine hour = ($38,000 - $16,500) / (5,000 - 2,000)
Variable cost per machine hour = $6.25

Therefore, the cost equation for electricity cost is:

Cost = $1,625.00 + $6.25 × Machine-hours.

Question 10

Thul Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow:  If the controller uses regression analysis to estimate costs,the estimate of the variable portion of electricity cost is:
A)Cost = $11.70 × Machine-hours.
B)Cost = $0.93 × Machine-hours.
C)Cost = $5.77 × Machine-hours.
D)Cost = $0.49 × Machine-hours.

Accepted Answer

The answer of Thul Company is interested in establishing the...

Question 11

In the learning curve equation Y = aX^b,the "a" term represents: A)the labor time required to produce the first unit. B)the labor time required to produce the last single unit. C)the cumulative number of units. D)the index of learning.

Accepted Answer

The "a" term in the learning curve equation represents the labor time required to produce the first unit. This term is a constant that represents the initial level of knowledge and experience of the worker or organization. As more units are produced, the labor time required decreases due to learning and experience gained.

Question 12

Hawkins Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: How much time will be needed to complete the 4^th unit? A)74.00 hours. B)57.80 hours. C)56.00 hours. D)54.40 hours.

Accepted Answer

The answer of Hawkins Products,Inc. ,has found that new products...

Question 13

In the learning curve equation Y = aX^b,the Y term represents: A)the labor time required to produce the first unit. B)the labor time required to produce the last single unit. C)the cumulative number of units. D)the index of learning.

Accepted Answer

The answer of In the learning curve equation Y =...

Question 14

In the learning curve equation Y = aX^b,the "b" term represents: A)the labor time required to produce the first unit. B)the labor time required to produce the last single unit. C)the cumulative number of units. D)the index of learning.

Accepted Answer

The "b" term in the learning curve equation represents the index of learning, which is the rate of improvement in productivity with each unit produced. Therefore, option D is the best choice. Options A, B, and C are not correct because they do not represent the index of learning.

Question 15

Thul Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow:  If the controller uses the high-low method to estimate costs,the fixed cost portion of the cost equation for electricity cost is:
A)$3,726.88.
B)$1,425.18.
C)$1,625.00.
D)$22,825.00.

Accepted Answer

The answer of Thul Company is interested in establishing the...

Question 16

Which of the following is the difference between variable costs and fixed costs: (CMA adapted)
A)variable costs per unit fluctuate and fixed costs per unit remain constant.
B)variable costs per unit are fixed over the relevant range and fixed costs per unit are variable.
C)total variable costs are variable over the relevant range and fixed in the long term,while fixed costs never change.
D)variable costs per unit change in varying increments,while fixed costs per unit change in equal units.

Accepted Answer

Variable costs per unit remain constant over the relevant range, while fixed costs per unit vary inversely with the level of activity.

Question 17

Which of the following is a common assumption of cost estimation?
A)Cost behavior depends on many cost drivers.
B)Cost behavior patterns are nonlinear outside of the relevant range.
C)Cost behavior patterns are linear within the relevant range.
D)Costs are curvilinear.

Accepted Answer

The common assumption of cost estimation is that cost behavior patterns are linear within the relevant range. This means that there is a constant rate of change in costs as activity levels change within a specific range, and this assumption makes cost estimation easier and more accurate.

Question 18

In determining cost behavior in business,the cost function is often expressed as Y = a + bX.Which one of the following cost estimation methods should not be used in estimating fixed and variable costs for the equation? (CMA adapted)
A)Scattergraph method.
B)Simple regression.
C)High and low point method.
D)Multiple regression.
E)Management analysis of data.

Accepted Answer

Management analysis of data is not a cost estimation method.

Question 19

The Business School at Eastern College is accumulating data as a first step in the preparation of next year's budget development.One cost that is being looked at closely is administrative costs as a function of student credit hours.Data on administrative costs and credit hours for the past thirteen months are shown below:  The controller's office has analyzed the data and has given you the results from the regression analysis:  Based on the results of the regression analysis,the estimate of the variable portion of administrative costs in a month with 200 credit hours would be:
A)$198,808.
B)$20,712.
C)$117,121.
D)$40,242.

Accepted Answer

The answer of The Business School at Eastern College is...

Question 20

Thul Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow:  If the controller uses regression analysis to estimate costs,the cost equation for electricity cost is:
A)Cost = $1,425.18 + $12.00 × Machine-hours.
B)Cost = $3,726.88 + $1,682.82 × Machine-hours.
C)Cost = $1,682.82 + $0.49 × Machine-hours.
D)Cost = $3,726.88 + $5.77 × Machine-hours.

Accepted Answer

The answer of Thul Company is interested in establishing the...

Quiz 5: Cost Estimation

Which of the following statements regarding the learning phenomenon is true?

A cost driver is defined as: (CMA adapted)

Hawkins Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: How much time will be needed to complete the 8th unit?

In the learning curve equation Y = aXb,the X term represents:

Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of the material handled? (CPA adapted)

In the learning curve equation Y = aXb,the "a" term represents:

Hawkins Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: How much time will be needed to complete the 4th unit?

In the learning curve equation Y = aXb,the Y term represents:

In the learning curve equation Y = aXb,the "b" term represents:

Which of the following is the difference between variable costs and fixed costs: (CMA adapted)

Which of the following is a common assumption of cost estimation?

In determining cost behavior in business,the cost function is often expressed as Y = a + bX.Which one of the following cost estimation methods should not be used in estimating fixed and variable costs for the equation? (CMA adapted)

Hawkins Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: How much time will be needed to complete the 8^th unit?

In the learning curve equation Y = aX^b,the X term represents:

In the learning curve equation Y = aX^b,the "a" term represents:

Hawkins Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: How much time will be needed to complete the 4^th unit?

In the learning curve equation Y = aX^b,the Y term represents:

In the learning curve equation Y = aX^b,the "b" term represents: