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CostMidterm
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Questions in this quiz (36)
1An R-squared value that approaches one (1.0) would indicate:
- AMulticollinearity
- BA low degree of explanatory power
- CA high degree of explanatory power.
- DHeteroscedasticity
- EThe absence of outliers.
2The learning curve in cost estimation is a good example of:
- ANon-linear cost behavior.
- BMachine-intensive production.
- CSimple regression.
- DA random variable.
- EEfficient labor.
3Simpson Enterprises hired Homer & Associates to design a new computer-aided manufacturing facility. The new facility was designed to produce 300 computers per month. The variable costs for each computer are $660 and the fixed costs total $74,700 per month. The average cost per unit, if the facility normally expects to operate at eighty-five percent of capacity, i calculated to be (round to nearest cent):
- A$952.94. = $660 + [$74,700/(300 × .85)]
- B$909.00.
- C936.67
- D$971.25.
- E$942.47.
4A manager uses regression to express sales as a function of advertising expenditures (X1), and per capita income (X2) in your sales area. The following multiple linear regression equation is developed:
Y=10+.51X1 +.45X2
The coefficient of determination (R ) is .96
Determine which of the following conclusions is valid regarding the coefficient of determination:- AMore analysis is needed. The coefficient of determination leaves much unexplained.
- Bhe regression line fits the data used in the sample very well. There is a strong indication of the relationship of the two variables with sales.
- CThe coefficient of determination is positive because the constant term is positive.
- DThe coefficient of determination should always be greater than one.
5Least-squares regression analysis output produces a ariety of information and statistics. Which of the
ollowing statistics provides information for fixed cost- AT-statistics and p-value for the beta (slope) coefficient
- BAdjusted R-square
- CThe Y (dependent) variable
- DT-statistic and p-value for the alpha (intercept) coefficient
- EThe X (independent) variable
6Given the cost formula Y = $20,000 + $4X, at what level of activity will tota cost be $40,000?
- A5,000 units
- B10,000 units
- C20,000 units
- D180,000 units
- ENone
7The linear equation Y = a + bX + e is often used to express cost formulas. In this equation:
- Athe b term represents variable cost per unit of activity.
- Bthe a term represents variable cost in total.
- Cthe X term represents total cost.
- DtheY term represents total fixed cost
- Ethe e term represents the relevant range
8Place the following steps in order for estimating a cos unction using quantitative analysis:
A.= Plot the data
B.= Estimate the cost function
C. = Choose the dependent variable D.= Identify the cost driver- AB A C D
- BD C A B
- CC D A B
- DA D C B
- ED C B A
9Which step of estimating a cost function using quantitati nalysis is the most difficult step for a manager to implement in cost analysis?
- AStep 1: Choose the Dependent Variable.
- BStep 2: Identify the Independent Variable, or Cost Driver.
- CStep 3: Collect Data of the Dependent Variable and th Cost Driver.
- DStep 4: Plot the Data
- EStep 5: Estimate the Cost Driver of the Estimated Cos Function.
10An inaccurate cost function with a slope coefficient that is estimated t low may MOST likely result in
- Apredicting total costs that are too high.
- Binitiating cost cutting measures when they are unnecessary
- Cevaluating a weak manager as having strong performance.
- Dpromoting a product that is actually more profitable than budgeted
11An inaccurate cost function with a constant that is estimated too high may MOST likely result in
- Aevaluating a weak manager as providing strong performance.
- Bpromoting a product that is actually less profitable than budgeted
- Cpredicting total costs that are too low.
- Dreplicating processes that are truly cost saving.
12A cost function with a lower constant than a year ago could indica all of the following EXCEPT:
- Alast year's cost function was inaccurate
- Ba new operations manager is being effective
- Cthe sales commission percentage has decreased
- Dinsurance premiums have decreased
13A cost function with a lower slope coefficient than a year ago cou indicate that:
- Atotal variable costs have decreased
- Bnew cost-cutting initiatives are beneficial
- Cproduction has decreased
- Drental costs have decreased
14If machine maintenance is scheduled at a time when production is a low level, then:
- Alow production is the cost driver of high repair costs
- Ban understanding of operations is needed to determine an appropriate cost driver
- Clow production should be avoided since it is the cause of machine maintenance
- Dmachine maintenance cannot be accurately predicted
15A steeply sloped regression line indicates:
- Aa strong relationship between the cost driver and costs
- Ba greater proportion of fixed costs than variable costs
- Can economically plausible relationship exists
- Dmanagement should cut costs
16A learning curve is a function:
- Athat measures the decline in labor-hours per unit due to workers becoming better at a job
- Bthat increases at a greater rate as workers become more familiar w their tasks
- Cwhere unit costs increase as productivity increases
- Dthat measures the increase in cost per unit as productivity decrease
- Ethat measures how quality increases over time
17Learning curve effects can be incorporated:
- Ainto performance evaluations
- Binto production schedules
- Cwhen using costs to price products
- DAll of these answers are correct.
- ENone of these answers are correct.
18The objectives of cost allocation are to
- AMotivate effort, provide incentives, and fairly determine rewards.
- BAccurately define, divide and spread direct costs.
- CValue, measure, and interpret cost data
- DConnect, communicate, and discern information
- EDefine, refine, and re-define indirect costs
19The most clear and unbiased basis for cost allocation exists when which one of the following can be determined?
- ACost shifting
- BBenefit received
- CEquity share
- DCause-and-effect relationship
- EAbility-to-bear
20Cost allocation is an important strategic issue for U.S. manufacturing firms with foreign subsidiaries because of:
- AThe tax implications
- BQuality concerns
- CImport restrictions
- DCultural differences
- EThe company's desire to grow
21Cost allocation provides a service firm a basis for evaluating the:
- ACost and profitability of its services
- BValue of its services
- CManufacturing costs for the company
- DProfitability of its customers
- EAll of the above
22Allocation of service department costs to producin departments is the most complex of the allocation phase of departmental cost allocation because of t likely presence of:
- AManager bias
- BFormula distracters
- CRepetitive steps
- DReciprocal flows
- ENon-value adding activities
23If a budgeted activity base (insulating) is used as the base in cost allocation, each department's cost allocation will be predictable, and not influenced by the:
- AActual total cost.
- BChange in activity
- CVariations from budget
- DErrors in calculations.
- EActual usage in other departments.
24In making decisions about whether to sell or further process joint products or by-products, allocation of common or joint costs is:
- AEssential.
- BUseful
- CIrrelevant and should be ignored
- DUseful depending on the method chosen.
- EThe only way to get the true total product cos
25Which one of the following methods of allocating joint costs allocates joint costs to joint products on the basis of estimated sales values at the split-off point?
- ANet realizable value method
- BPhysical measure method
- CConstant gross margin percentage method
- DNet sales value method
- ESales value at split-off method
26Which of the following statements best describes a by- product?
- AA product that is produced from material that would otherw be scrap.
- BA product that has a selling price similar to that of the main product.
- CA product created along with the main product whose sales value does not cover its cost of production.
- DA product that usually produces a small amount of revenue when compared to the main product's revenue.
- EA product that has a lower unit selling price than the main unit
27For the purposes of cost accumulation, which of the following are tifiable as different individual products before the split-off point?
- Aby products: no
joint products: no - Bby products: yes
joint products: no - Cby products: yes
joint products: yes - Dby products: no
joint products: yes
- Aby products: no
28Which of the following is not one of the objectives of cost allocation?
- AMotivate managers to exert a high-level of effort.
- BProvide useful departmental and product costs.
- CIdentify production constraints.
- DProvide the right incentive for managers to make the right decisions.
- EProvide an appropriate basis for performance evaluation
29Net Realizable Value (NRV) of a product is:
- ASplit-off cost - profit margin - additional processing and selling cost.
- BProfit at split-off + additional processing and selling cost
- CUltimate sales value - additional processing and selling cost.
- DUltimate sales value + additional processing and selling cost.
- ECost allocation plus separable cost
30Which is not a reason for allocating internal costs to cost objects?
- AManagers should be charged for benefits received by departments (or products) under their control
- BUS GAAP requires allocation of factory overheads
- CTo determine the selling price of products
- DTo determine the amount to be reimbursed under a cost
reimbursement contract - EAll of the above are reasons for allocating internal costs
to cost objects
31You are going to dinner with three friends, one who likes steak, another wine, and the third is a vegetarian (which is assumed to be the least expensive). Which is true?
- AHow the bill is shared has no effect on what and how much people choose to eat
- BEqual sharing of the bill ensures that people order a similar dollar amount of food
- CThe wine-drinker will argue for equal shares, and will guzzle (drink) as fast (and/or as much) as possible
- DThe vegetarian will be better off with equal shares
- ENone of the above
32A sound allocation system should:
- Abe cheap and easy to administer
- Bprovide incentives for cost control
- Ccharge in proportion to amount used or
benefit received - Dbe perceived as equitable by those who are
charged - Ebe all of the above
33The author of our textbook, Jerold Zimmerman argues that cost allocation:
- Ais a form of transfer pricing for indirect costs
- Bis an internal tax on services
- Cdistorts choices that managers would make
otherwise - Dshould be imposed when marginal cost exceeds
average cost of an internal resource - Eall of the above
34Internal resources, such as legal dept., training dept., duplicating, telephone services, tend to be under-utiliz leading to Zimmerman's death spiral, when:
- Amanagers may choose whether to purchase the service internally or externally
- Bthe internal pricing system seeks to recover sunk costs
- Cmanagers may decide to reduce the quantity of service
used - Dthe internal pricing system utilizes full costs
- Eall of the above
35When considering the purchase of a large central system, such power generation or computer networks, firms have to decide how big a system to acquire and whether, and, if so, how to charge users for it subsequently. Which is true?
- ACharge: None
Likely consequence:Firm acquires more capacity than needed - BCharge: Full cost
Likely consequence: Demand for resources equals capacity - CCharge: Deprecation only
Likely consequence:Firm acquires more capacity than neede - DCharge: Deprecation only
Likely consequence:Demand for resources equals capacity - ENone of the above
- ACharge: None
36Which is not true of the various methods of allocating service
department costs?- AApplication of the reciprocal method in a complex corporation
usually requires the use of a computer - BThe direct method is quick to compute, accurate, and has low
information requirements - CThere are multiple sequence possibilities for the step-down
method - DThe choice of method affects the optimal allocation of resources
- EAll of the above are true
- AApplication of the reciprocal method in a complex corporation
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- Quiz on CostMidterm, created by susan bye on 24/04/2018.
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- susan bye
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