COST MANAGEMENT MEASURING
MONITORING AND MOTIVATING
PERFORMANCE ACTUAL TEST BANK
TESTED QUESTIONS WITH VERIFIED
SOLUTIONS
●● The learning curve in cost estimation is a good example of:
Answer: Non-linear cost behavior
●● Simpson Enterprises hired Home & 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, is calculated to be:
Answer: $952.94 = $660 + [$74,700/(300 x .85)]
●● A 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 (R2) is .96
Determine which of the following conclusions is valid regarding the
coefficient of determination:
, Answer: The 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.
●● Least-squares regression analysis output produces a variety of
information and statistics. Which of the following statistics provides
information for fixed costs?
Answer: T-statistic and p-value for the alpha (intercept) coefficient
●● Given the cost formula Y = $20,000 + $4X, at what level of activity
will total cost be $40,000?
Answer: 5,000 units
●● The linear equation Y = a + bX + e is often used to express cost
formulas. In this equation:
Answer: the b term represents variable cost per unit of activity.
●● Place the following steps in order for estimating a cost function
using quantitative analysis:
A. = Plot the data
B. = Estimate the cost function
C. = Choose the dependent variable
D. = Identify the cost driver
Answer: C D A B
MONITORING AND MOTIVATING
PERFORMANCE ACTUAL TEST BANK
TESTED QUESTIONS WITH VERIFIED
SOLUTIONS
●● The learning curve in cost estimation is a good example of:
Answer: Non-linear cost behavior
●● Simpson Enterprises hired Home & 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, is calculated to be:
Answer: $952.94 = $660 + [$74,700/(300 x .85)]
●● A 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 (R2) is .96
Determine which of the following conclusions is valid regarding the
coefficient of determination:
, Answer: The 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.
●● Least-squares regression analysis output produces a variety of
information and statistics. Which of the following statistics provides
information for fixed costs?
Answer: T-statistic and p-value for the alpha (intercept) coefficient
●● Given the cost formula Y = $20,000 + $4X, at what level of activity
will total cost be $40,000?
Answer: 5,000 units
●● The linear equation Y = a + bX + e is often used to express cost
formulas. In this equation:
Answer: the b term represents variable cost per unit of activity.
●● Place the following steps in order for estimating a cost function
using quantitative analysis:
A. = Plot the data
B. = Estimate the cost function
C. = Choose the dependent variable
D. = Identify the cost driver
Answer: C D A B
