Question : Objective 10.5 1) An inaccurate cost function with a slope coefficient : 1216890

Objective 10.5

1) 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

2) 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

3) 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

4) 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

5) 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

6) 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

7) 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

8) 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

9) 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

10) When evaluating and choosing cost drivers all of the following are true EXCEPT:

A) the cost driver is economically plausible.

B) there is a significance of effect of the independent variable

C) there is an independent verification of the relationship by a committee of cost accountants

D) there is a goodness of fit between the various data points and the regression line