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Exam 8: Determining How Costs Behave

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Question 41

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Variable and fixed cost behavior patterns are not valid for linear cost functions within a given relevant range.

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Question 42

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The cost function y = 40 + 7X has a slope coefficient of 7.

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Question 43

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The managerial accountant at Hampson Company reported the following information: Required: Use the high-low method to compute the difference of the Cost Driver: Machine Hours,the Difference of the Indirect Manufacturing Labor,and the slope coefficient b for each machine hour.

Which of the following is not a representation of a cause-and-effect relationship?

Why do managers plot data on graphs?

When inflation has affected the costs or the cost driver,managers remove purely inflationary price effects by:

In which step of estimating a cost function using quantitative analysis would a manager determine the dependent variable to use in a cost relationship?

The independent variable is the factor used to predict the dependent variable.

Which of the following problems arise when costs of depreciation,insurance,or rent are allocated to products to calculate the cost of each unit of output?

The regression analysis approach illustrates how to evaluate different ________.

What is the relationship of machine-hours used compared to indirect manufacturing labor costs if the vertical differences between actual costs and predicted costs are smaller for machine-hour regression than for the direct manufacturing labor-hour regression?

The manager at Mymic,LLC,a government contracting firm,uses a cost-estimation method to estimate direct manufacturing costs.The manager complained to the managerial accountant because the relationship between inputs and outputs are difficult to specify for the items related to indirect manufacturing costs and R&D costs.Which cost estimation method do they use at the company?

Which of the following problems arise when managers fail to keep accounting records on the accrual basis?

The accounting manager at the Peanut Factory reported direct manufacturing labor cost of $14 per hour.Write a linear cost function equation to represent the cost.Use y for estimated costs and X to represent the activity of the cost driver.

What does the managerial accountant do if inflation impacts the costs,the cost driver,or both?

The Hallman Organization sells units of glass to manufacturers.The manager uses prices that are set by the market.The manager expects to sell 650 units of glass each week.The managerial accountant estimated that the company needs 72 machine-hours and 21 direct manufacturing labor-hours each week to produce 650 units of glass. Hallman Organization would predict indirect manufacturing labor costs using the machine-hour regression equation of: y = $300.98 + ($10.31 per machine hour × 72 machine hours)= $1,043.30. Review the regression equation if the manager used direct manufacturing labor-hours as the cost driver: y = $744.67 + ($7.72 per labor hour × 21 labor hours)= $906.79 Required: Discuss the impact on cost if the managerial accountant used the direct manufacturing hours as the cost driver versus the indirect labor costs.

How can managers avoid ethical or legal problems with cost estimates and obtain accurate cost data?

Errors in measuring the costs and the cost drivers are never serious because managers can always fix those errors.

Direct material costs are not always linear variable costs as a result of quantity discounts on direct material purchases.

Why are learning curves important to managers?