Question;ACTIVITY ANALYSIS,COST ?;BEHAVIOUR AND COST ESTIMATION;Multiple;Choice Questions;1. Which of the following is not an;example of a committed fixed cost?;A. Property taxes.;B. Depreciation on buildings.;C. Salaries of management personnel.;D. Outlays for advertising programs.;E. Equipment rental costs.;2. Committed fixed costs would include;A. advertising.;B. research and development.;C. depreciation on buildings and equipment.;D. contributions to charitable organizations.;E. expenditures for direct labor.;3. Amounts spent for charitable contributions;are an example of a(n);A. committed fixed cost.;B. committed variable cost.;C. discretionary fixed cost.;D. discretionary variable cost.;E. engineered cost.;4. Which of the following would not;typically be classified as a discretionary fixed cost?;A. Equipment depreciation.;B. Employee development (education) programs.;C. Advertising.;D. Outlays for research and development.;E. Charitable contributions.;5. Which of the following choices correctly;classifies a committed fixed cost and a discretionary fixed cost?;Committed;Discretionary;A.;Promotion;Management salaries;B.;Building depreciation;Charitable contributions;C.;Management training;Property taxes;D.;Equipment rentals;Equipment depreciation;E.;Research and development;Advertising;6. Which type of fixed cost (1) tends to be more;long-term in nature and (2) can be cut back more easily in bad economic times;without doing serious harm to organizational goals and objectives?;Long Term in;Nature;Can be Cut Back More Easily In;Bad Economic Times;A.;Committed;Committed;B.;Committed;Discretionary;C.;Discretionary;Committed;D.;Discretionary;Discretionary;E.;Committed;No difference;between;committed;and discretionary;7. High-tech automation combined with a;downsizing of a company's hourly labor force often results in;A. increased fixed costs and increased variable;costs.;B. increased fixed costs and reduced variable;costs.;C. reduced fixed costs and increased variable;costs.;D. reduced fixed costs and reduced variable;costs.;E. increased discretionary fixed costs and;reduced committed fixed costs.;8. Which of the following techniques is not;used to analyze cost behavior?;A. Least-squares regression.;B. High-low method.;C. Visual-fit method.;D. Linear programming.;E. Multiple regression.;9. The high-low method and least-squares;regression are used by accountants to;A. evaluate divisional managers for purposes of;raises and promotions.;B. choose among alternative courses of action.;C. maximize output.;D. estimate costs.;E. control operations.;10. Which of the following statements about the;visual-fit method is (are) true?;I.;The;method results in the creation of a scatter diagram.;II.;The;method is not totally objective because of the manner in which the cost line;is determined.;III.;The;method is especially helpful in the determination of outliers.;A. I only.;B. II only.;C. I and II.;D. I and III.;E. I, II, and III.;11. The nonstatistical method of cost estimation;that calls for the creation of a scatter diagram is the;A. least-squares regression method.;B. high-low method.;C. visual-fit method.;D. account analysis method.;E. multiple regression method.;12. Which of the following methods of cost;estimation relies on only two data points?;A. Least-squares regression.;B. The high-low method.;C. The visual-fit method.;D. Account analysis.;E. Multiple regression.;Use the;following to answer questions 13-14;Swanson and;Associates presently leases a copy machine under an agreement that calls for a;fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of;$360 in March, in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to;analyze costs.;13. Swanson's variable cost per copy is;A. $0.040.;B. $0.051.;C. $0.053.;D. $0.056.;E. an amount other than those given above.;14. Swanson's monthly fixed fee is;A. $80.;B. $102.;C. $106.;D. $112.;E. an amount other than those given above.;Use the;following to answer questions 15-17;Atlanta, Inc.;which uses the high-low method to analyze cost behavior, has determined that;machine hours best explain the company's utilities cost. The company's relevant range of activity;varies from a low of 600 machine hours to a high of 1,100 machine hours, with;the following data being available for the first six months of the year;Month;Utilities;Machine;Hours;January;$8,700;800;February;8,360;720;March;8,950;810;April;9,360;920;May;9,625;950;June;9,150;900;15. The variable utilities cost per machine hour;is;A. $0.18.;B. $4.50.;C. $5.00.;D. $5.50.;E. an amount other than those listed above.;16. The fixed utilities cost per month is;A. $3,764.;B. $4,400.;C. $4,760.;D. $5,100.;E. an amount other than those listed above.;17. Using the high-low method, the utilities cost;associated with 980 machine hours would be;A. $9,510.;B. $9,660.;C. $9,700.;D. $9,790.;E. an amount other than those listed above.;18. Hitchcock, Inc., uses the high-low method to;analyze cost behavior. The company;observed that at 12,000 machine hours of activity, total maintenance costs;averaged $7.00 per hour. When activity;jumped to 15,000 machine hours, which was still within the relevant range, the;average cost per machine hour totaled $6.40.;On the basis of this information, the variable cost per machine hour;was;A. $4.00.;B. $6.40.;C. $6.70.;D. $7.00.;E. an amount other than those listed above.;19. Northridge, 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 cost per machine hour totaled $9.75.;On the basis of this information, the company's fixed maintenance costs;were;A. $24,000.;B. $90,000.;C. $210,00.;D. $234,000.;E. an amount other than those listed above.;20. The following data relate to the Hodges;Company for May and August of the current year;May;August;Maintenance hours;10,000;12,000;Maintenance cost;$260,000;$300,000;May;and August were the lowest and highest activity levels, and Hodges uses the;high-low method to analyze cost behavior.;Which of the following statements is true?;A. The variable maintenance cost is $25 per;hour.;B. The variable maintenance cost is $25.50 per;hour.;C. The variable maintenance cost is $26 per;hour.;D. The fixed maintenance cost is $60,000 per;month.;E. More than one of the above statements is;true.;Use the;following to answer questions 21-23;Yang;Manufacturing, which uses the high-low method, makes a product called Yin. The company incurs three different cost types;(A, B, and C) and has a relevant range of operation between 2,500 units and;10,000 units per month. Per-unit costs;at two different activity levels for each cost type are presented below.;Type A;Type B;Type C;Total;5,000 units;$4;$9;$4;$17;7,500 units;$4;$6;$3;$13;21. The cost types shown above are identified by;behavior as;Type A;Type B;Type C;A.;Fixed;Variable;Semivariable;B.;Fixed;Semivariable;Variable;C.;Variable;Semivariable;Fixed;D.;Variable;Fixed;Semivariable;E.;Semivariable;Variable;Fixed;22. 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.;23. 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.;24. 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.;25. Mohawk 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 Mohawk's variables?;Dependent;Independent;A.;MOH;MOH;B.;MOH;MH;C.;MH;MOH;D.;MH;MH;E.;8;240,000;26. Checkers 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.;27. Boulder, 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.;28. Tempe;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;Scatter Diagram;Regression Analysis;Variable cost per unit sold;$6.50;$6.80;Total monthly fixed cost;$45,000;$42,500;Tempe;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.;29. Waller 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, Waller should use;A. simple regression.;B. multiple regression.;C. a scatter diagram.;D. complex regression.;E. the high-low method.;30. 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.;31. A staff;assistant at Washington 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.;32. 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 the above are issues in data;collection.;33. 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.
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