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57 Cards in this Set
- Front
- Back
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Which of the following statements related to assumptions about estimating linear
cost functions is FALSE? a. Variations in a single cost driver explain variations in total costs. b. A cost object is anything for which a separate measurement of costs is desired. c. A linear function approximates cost behavior within the relevant range of the cost driver. d. A high correlation between two variables ensures that a cause-and-effect relationship exists. |
d
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A high correlation between two variables s and t indicates that:
a. s may cause t, or t may cause s b. both may be affected by a third variable c. the correlation may be due to random chance d. All of these answers are correct. |
d
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Which of the following does NOT represent a cause-and-effect relationship?
a. Material costs increase as the number of units produced increases. b. A company is charged 40 cents for each brochure printed and mailed. c. Utility costs increase at the same time that insurance costs increase. d. It makes sense that if a complex product has a large number of parts it will take longer to assemble than a simple product with fewer parts. |
c
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Dougherty Company employs 20 individuals. Eight employees are paid $12 per
hour and the rest are salaried employees paid $3,000 a month. How would total costs of personnel be classified? a. variable b. mixed c. a variable cost within a relevant range d. a fixed cost within a relevant range |
b
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A linear cost function can represent:
a. mixed cost behaviors b. fixed cost behaviors c. variable cost behaviors d. All of these answers are correct. |
d
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The cost function y = 1,000 + 5X
a. has a slope coefficient of 1,000 b. has an intercept of 5 c. is a straight line d. represents a fixed cost |
c
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The cost function y = 8,000 + 4X
a. represents a mixed cost b. will intersect the y-axis at 4 c. has a slope coefficient of 8,000 d. is a curved line |
a
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Which of the following is an equation of a variable cost function?
a. y=b b. y = a + bX c. y = bX d. y=a |
c
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The industrial engineering method estimates cost functions:
a. based on analysis and opinions gathered from various departments b. quickly while incurring little cost c. using qualitative rather than quantitative analysis d. by analyzing the relationship between inputs and outputs in physical terms |
d
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The conference method estimates cost functions:
a. using quantitative methods that can be very time consuming and costly b. based on analysis and opinions gathered from various departments c. using time-and-motion studies d. by mathematically analyzing the relationship between inputs and outputs in physical terms |
b
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The account analysis method estimates cost functions:
a. by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis b. using time-and-motion studies c. at a high cost, which renders it seldom used d. in a manner that cannot be usefully combined with any other cost estimation methods |
a
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Quantitative analysis methods estimate cost functions:
a. which depend on the experience and judgment of the analyst for accuracy b. based on analysis and opinions gathered from various departments c. using significant amounts of historical data d. using the pooling of knowledge from each value chain function |
c
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Gathering cost information through observations and interviews from departments
within an organization is known as the: a. account analysis method b. conference method c. industrial engineering method d. quantitative analysis method |
b
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Which cost estimation method analyzes accounts in the subsidiary ledger as
variable, fixed, or mixed using qualitative methods? a. the account analysis method b. the conference method c. the industrial engineering method d. the quantitative analysis method |
a
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Which cost estimation method uses a formal mathematical method to develop cost
functions based on past data? a. the account analysis method b. the conference method c. the industrial engineering method d. the quantitative analysis method |
d
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Which cost estimation method may use time-and-motion studies to analyze the
relationship between inputs and outputs in physical terms? a. the account analysis method b. the conference method c. the industrial engineering method d. the quantitative analysis method |
c
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The cost to be predicted is referred to as the:
a. independent variable b. dependent variable c. cost driver d. regression |
b
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The independent variable:
a. is also referred to as the cost driver b. may also be called the cost-allocation base if referring to an indirect cost c. should have an economically plausible relationship with the dependent variable d. All of these answers are correct. |
d
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How many separate cost pools should be formed given the following information:
Cost Cost driver Postage costs # of brochures mailed Printing and paper costs # of brochures mailed Quality control costs # of inspections Customer service costs # of customers served a. b. c. d. 1 cost pool 2 cost pools 3 cost pools 4 cost pools |
c
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Place the following steps in order for estimating a cost function using quantitative
analysis: A = Plot the data B = Estimate the cost function C = Choose the dependent variable D = Identify the cost driver a. DCAB b. CDAB c. ADCB d. DCBA |
b
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All individual cost items included in the dependent variable should have:
a. the same cost driver b. a cause-and-effect relationship with the independent variable c. an economically plausible relationship with the independent variable d. All of these answers are correct. |
d
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Collecting data on the dependent variable and the cost driver may include:
a. interviews with managers b. collecting data over a long period of time c. collecting data from different entities over the same period of time d. All of these answers are correct. |
d
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A plot of data that results in bunched points with little slope generally indicates:
a. a strong relationship b. a weak relationship c. a positive relationship d. a negative relationship |
b
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A plot of data that results in one extreme observation MOST likely indicates that:
a. more than one cost pool should be used b. an unusual event such as a plant shutdown occurred during that month c. the cost-allocation base has been incorrectly identified d. individual cost items do not have the same cost driver |
b
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Cross-sectional data analysis includes:
a. using a variety of time periods to measure the dependent variable b. using the highest and lowest observation c. observing different entities during the same time period d. comparing information in different cost pools |
c
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Time-series data analysis includes:
a. using a variety of time periods to measure the dependent variable b. using the highest and lowest observation c. observing different entities during the same time period d. comparing information in different cost pools |
a
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When using the high-low method, the two observations used are the high and low
observations of the: a. cost driver b. dependent variables c. slope coefficient b. residual term |
a
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When using the high-low method, the denominator of the equation that determines
the slope is the: a. dependent variable b. independent variable c. difference between the high and low observations of the cost driver d. difference between the high and low observations of the dependent variables |
c
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The high-low method:
a. easily handles estimating the relationship between the dependent variable and two or more independent variables b. is more accurate than the regression method c. calculates the slope coefficient using only two observed values within the relevant range d. uses the residual term to measure goodness of fit |
c
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Put the following steps in order for using the high-low method of estimating a cost
function: A = Identify the cost function B = Calculate the constant C = Calculate the slope coefficient D = Identify the highest and lowest observed values a. DCAB b. CDAB c. ADCB d. DCBA |
d
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Regression analysis:
a. is simple to compute b. measures the change in a dependent variable associated with one or more independent variables c. is mathematical so it does not require an understanding of operations d. uses the constant to measure goodness of fit |
d
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Simple regression differs from multiple regression in that:
a. multiple regression uses all available data to estimate the cost function, whereas simple regression only uses simple data b. simple regression is limited to the use of only the dependent variables and multiple regression can use both dependent and independent variables c. simple regression uses only one independent variable and multiple regression uses more than one independent variable d. simple regression uses only one dependent variable and multiple regression uses more than one dependent variable |
c
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The slope of the line of regression is the:
a. rate at which the dependent variable varies b. rate at which the independent variable varies c. level of total fixed costs d. level of total variable costs |
a
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An inaccurate cost function with a slope coefficient that is estimated too low may
MOST likely result in: a. predicting total costs that are too high b. initiating cost cutting measures when they are unnecessary c. evaluating a weak manager as having strong performance d. promoting a product that is actually more profitable than budgeted |
b
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An inaccurate cost function with a constant that is estimated too high may MOST
likely result in: a. evaluating a weak manager as providing strong performance b. promoting a product that is actually less profitable than budgeted c. predicting total costs that are too low d. replicating processes that are truly cost saving |
a
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A cost function with a lower constant than a year ago could indicate all of the
following EXCEPT: a. last year’s cost function was inaccurate b. a new operations manager is being effective c. the sales commission percentage has decreased d. insurance premiums have decreased |
c
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A cost function with a lower slope coefficient than a year ago could indicate that:
a. total variable costs have decreased b. new cost-cutting initiatives are beneficial c. production has decreased d. rental costs have decreased |
b
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If machine maintenance is scheduled at a time when production is at a low level,
then: a. low production is the cost driver of high repair costs b. an understanding of operations is needed to determine an appropriate cost driver c. low production should be avoided since it is the cause of machine maintenance d. machine maintenance cannot be accurately predicted |
b
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Goodness-of-fit measures how well the predicted values in a cost estimating
equation: a. match the cost driver b. determine the level of activity c. match the actual cost observations d. rely on the independent variable |
c
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A steeply sloped regression line indicates:
a. a strong relationship between the cost driver and costs b. a greater proportion of fixed costs than variable costs c. an economically plausible relationship exists d. management should cut costs |
a
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The smaller the residual term the:
a. stronger the relationship between the cost driver and costs b. weaker the relationship between the cost driver and costs c. steeper the slope of the cost function d. gentler the slope of the cost function |
a
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When using activity-based costing all of the following are true EXCEPT that:
a. all cost drivers should be output unit-level cost drivers b. there are a great number and variety of cost drivers and cost pools c. industrial engineering, conference, and regression analysis can be used to estimate slope coefficients d. the more cost pools, the greater the chance of estimation error |
a
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Over the short run, a nonlinear cost function would MOST likely result from all of
the following EXCEPT: a. quantity discounts for each additional 10,000 parts purchased b. purchasing another $250,000 printing machine to double production c. hiring a third production supervisor d. incurring greater total utility costs for each machine-hour of operation |
d
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Examples of nonlinear cost functions include all of the following EXCEPT:
a. step variable-cost functions b. step fixed-cost functions c. learning curves d. mixed cost functions |
d
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A step fixed-cost function:
a. is fixed over the short run but not over the long run b. is often approximated with a continuous variable-cost function c. remains the same over a narrow range of activity d. example includes setup costs |
a
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A step variable-cost function:
a. is fixed over the long run but not over the short run b. is often approximated with a continuous variable-cost function c. remains the same over a wide range of activity d. example includes adding additional warehouse space |
b
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A learning curve is a function:
a. that measures the decline in labor-hours per unit due to workers becoming better at a job b. that increases at a greater rate as workers become more familiar with their tasks c. where unit costs increase as productivity increases d. that is linear |
a
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An experience curve:
a. is a narrower application of the learning curve b. measures the decline in cost per unit as production decreases for various value- chain functions such as marketing as production increases c. only measures the decline in labor-hours per unit as units produced increases d. measures the increase in cost per unit as productivity increases |
b
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Learning curve effects can be incorporated:
a. into performance evaluations b. into production schedules c. when using costs to price products d. All of these answers are correct. |
d
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The learning-curve models presented in the text examine:
a. how quality increases over time b. how efficiency increases as more units are produced c. how setup costs decline as more workers are added d. the change in variable costs when quantity discounts are available |
b
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The ideal database contains:
a. numerous cost driver observations b. reliably measured observations c. cost driver observations spanning a wide range d. All of these answers are correct. |
d
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Data collection problems arise when:
a. data are recorded electronically rather than manually b. accrual-basis costs are used rather than cash-basis costs c. fixed and variable costs are not separately identified and both are allocated to products on a per unit basis d. purely inflationary price effects are removed |
c
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Managers who design data collection reports that regularly and routinely obtain
required data are helping to ensure that: a. inflationary effects are removed b. all data are recorded c. extreme values are not used to calculate cost functions d. the relationship between the cost driver and the cost remains stable over time |
b
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Extreme values of observations may be the result of:
a. a misplaced decimal point in the recorded data b. classifying a cost incorrectly c. a temporary plant shutdown d. All of these answers are correct. |
d
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All of the following are cost analysis problems EXCEPT:
a. fixed costs are allocated as if they are variable costs b. extreme observations are adjusted or removed c. time periods differ for measuring items included in the dependent variable and the cost driver(s) d. homogeneous relationships between individual cost items in the dependent variable pool and cost drivers may not be present |
b
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A major concern that arises with multiple regression is multicollinearity, which
exists when: a. in simple regression, when the dependent variable is not normally distributed b. in simple regression, when the R2 statistic is low c. in multiple regression, when the R2 statistic is low d. in multiple regression, when two or more independent variables are correlated with one another |
d
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In multiple regression, when two or more independent variables are correlated with
one another, the situation is known as: a. heteroscedasticity b. homoscedasticity c. multicollinearity d. autocorrelation |
c
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