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In the formula Y = a + bx, a refers to the


A) slope.
B) intercept.
C) dependent variable.
D) independent variable.

E) None of the above
F) All of the above

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SeyChy collected the following data on manufacturing costs and activity cost drivers for two months: SeyChy collected the following data on manufacturing costs and activity cost drivers for two months: Required: Required: SeyChy collected the following data on manufacturing costs and activity cost drivers for two months: Required:

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The following computer printout estimated overhead costs using multiple regression: The following computer printout estimated overhead costs using multiple regression: Which slope and intercept parameters are significant at the 0.05 level? A) intercept B) setup hours C) number of parts D) All of the above are significant Which slope and intercept parameters are significant at the 0.05 level?


A) intercept
B) setup hours
C) number of parts
D) All of the above are significant

E) B) and D)
F) A) and D)

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The following information was available about supplies cost for the first three months of the year: The following information was available about supplies cost for the first three months of the year: Using the high-low method, an estimate of supplies cost at 4,500 units of production would be A) £19,400. B) £20,500. C) £19,950. D) none of the above. Using the high-low method, an estimate of supplies cost at 4,500 units of production would be


A) £19,400.
B) £20,500.
C) £19,950.
D) none of the above.

E) A) and C)
F) C) and D)

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In a simple least-squares regression where X refers to the number of sales calls made by a sales department and Y refers to the monthly total cost of the sales department, the R-squared in the regression output would represent:


A) the estimated monthly total costs of the sales department.
B) the estimated monthly fixed costs of the sales department.
C) the estimated monthly variable costs per unit of the sales department.
D) the percent of variation in Y that is explained by X.

E) B) and D)
F) A) and B)

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Which of the following is a strength of the high-low advantage method?


A) Only two observations are used to develop the cost function.
B) The high and low activity levels may not be representative.
C) The method does not detect if the cost behaviour is nonlinear.
D) The method is easy to apply.

E) B) and D)
F) A) and D)

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Figure 23-1 Lee Ltd. manufactures and sells party items. The following representative direct labour hours and production costs are provided for a four-month period: Figure 23-1 Lee Ltd. manufactures and sells party items. The following representative direct labour hours and production costs are provided for a four-month period: Let a = Fixed production costs per month b = Variable production costs per direct labour hour n = Number of months X = Direct labour hours per month Y = Total monthly production costs \Sigma = Summation -Refer to Figure 23-1. The cost function derived by the least-squares cost estimation method A) is linear. B) must be tested for minima and maxima. C) is parabolic. D) is quadratic. Let a = Fixed production costs per month b = Variable production costs per direct labour hour n = Number of months X = Direct labour hours per month Y = Total monthly production costs Σ\Sigma = Summation -Refer to Figure 23-1. The cost function derived by the least-squares cost estimation method


A) is linear.
B) must be tested for minima and maxima.
C) is parabolic.
D) is quadratic.

E) A) and C)
F) A) and B)

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In the formula Y = a + bx, Y refers to the


A) slope.
B) intercept.
C) dependent variable.
D) independent variable.

E) A) and D)
F) A) and B)

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Figure 23-3 Abboud Company is planning to introduce a new product with an 80 percent cumulative learning curve for production for batches of 1,000 units. The variable labour costs are £30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are £10,000 in fixed costs not subject to learning. -Refer to Figure 23-3. What is the individual unit time (labour hours) to produce 2,000 units?


A) 100 hours
B) 80 hours
C) 20 hours
D) 60 hours

E) A) and D)
F) A) and B)

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Kane Ltd. found its maintenance cost and sales revenues to be somewhat correlated. Last year's high and low observations were as follows: Kane Ltd. found its maintenance cost and sales revenues to be somewhat correlated. Last year's high and low observations were as follows: What is the fixed portion of the maintenance cost? A) £24,000 B) £42,000 C) £30,000 D) £12,000 What is the fixed portion of the maintenance cost?


A) £24,000
B) £42,000
C) £30,000
D) £12,000

E) None of the above
F) A) and B)

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Greene Enterprises has the following information about its truck fleet miles and operating costs: Greene Enterprises has the following information about its truck fleet miles and operating costs: What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2008 is 500,000 miles? A) £288,000 B) £296,000 C) £256,000 D) £320,000 What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2008 is 500,000 miles?


A) £288,000
B) £296,000
C) £256,000
D) £320,000

E) A) and B)
F) C) and D)

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What is the difference between a correlation equal to -1 and a correlation equal to 0?


A) A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of 0 means they are moving in opposite directions.
B) A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of 0 means they are unrelated.
C) A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of 0 means they are moving in the same direction.
D) A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of 0 means they are unrelated.

E) A) and C)
F) A) and B)

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Innova, SA., is beginning the production of a new product. Management believes that 500 labour hours will be required to complete the new unit. A 90 percent cumulative average-time learning curve model for direct labour hours is assumed to be valid. Data on costs are as follows: Innova, SA., is beginning the production of a new product. Management believes that 500 labour hours will be required to complete the new unit. A 90 percent cumulative average-time learning curve model for direct labour hours is assumed to be valid. Data on costs are as follows: Required: a. Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and cumulative total time in hours using the cumulative average-time learning curve. Complete the table for 1, 2, 4, and 8 units. b. Set up a similar table assuming an 80 percent with the cumulative average-time learning curve. c. What is the difference in variable cost of producing four units? Required: a. Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and cumulative total time in hours using the cumulative average-time learning curve. Complete the table for 1, 2, 4, and 8 units. b. Set up a similar table assuming an 80 percent with the cumulative average-time learning curve. c. What is the difference in variable cost of producing four units?

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The following computer printout estimated overhead costs using multiple regression: The following computer printout estimated overhead costs using multiple regression: The model being measured is A) Overhead = 1,000 + 25(Setup hours) + 100(# of parts) . B) Overhead = 510 + 0.305(Setup hours) + 10.527(# of parts) . C) Overhead = 0.98 + 40.98(Setup hours) + 4.865(# of parts) . D) Overhead = 1,000 + 25(Setup hours) . The model being measured is


A) Overhead = 1,000 + 25(Setup hours) + 100(# of parts) .
B) Overhead = 510 + 0.305(Setup hours) + 10.527(# of parts) .
C) Overhead = 0.98 + 40.98(Setup hours) + 4.865(# of parts) .
D) Overhead = 1,000 + 25(Setup hours) .

E) All of the above
F) None of the above

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The scatterplot method of cost estimation


A) is influenced by extreme observations.
B) requires the use of judgment.
C) uses the least-squares method.
D) is superior to other methods in its ability to distinguish between discretionary and committed fixed costs.

E) None of the above
F) B) and C)

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Advantages of the method of least squares over the high-low method include all the following EXCEPT


A) a statistical method is used to mathematically derive the cost function.
B) only two points are used to develop the cost function.
C) the squared differences between actual observations and the line (cost function) are minimized.
D) all the observations have an effect on the cost function.

E) All of the above
F) B) and D)

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In the formula Y = a + bx, x refers to the


A) slope.
B) intercept.
C) dependent variable.
D) independent variable.

E) A) and B)
F) A) and C)

Correct Answer

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The percentage change in the dependent variable that is explained by the change in the independent variable is measured by the


A) intercept.
B) slope.
C) coefficient of determination.
D) correlation coefficient.

E) None of the above
F) A) and D)

Correct Answer

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English Ltd. analyzed the relationship between total factory overhead and changes in direct labour hours. It found the following: Y = £6,000 + £6X The Y in the equation is an estimate of


A) total variable costs.
B) total direct labour hours.
C) total factory overhead.
D) total fixed costs.

E) A) and C)
F) B) and D)

Correct Answer

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In the formula Y = a + bx, b refers to the


A) slope.
B) intercept.
C) dependent variable.
D) total variable costs.

E) C) and D)
F) None of the above

Correct Answer

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