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4. The salaries you could be earning by working rather than attending college are an example of
A. Misplaced Cost
B. Opportunity Cost
C. Sunk Cost
D. Outlay Cost
9. Sunk costs
A. Are relevant to long-term decisions but not to short-term decisions
B. Are relevant to decision making
C. Are subtitles for opportunity costs
D. In themselves are not relevant to decision making
10. The costs presented to management for an equipment replacement decision should be limited
to
A. Relevant Costs
B. Standard Costs
C. Controllable Costs
D. Conversion Costs
11. Management accountants are concerned with incremental unit costs. These cost are similar to
the following except:
A. The cost to produce an additional unit
B. The manufacturing cost
C. The economic marginal cost
D. The variable cost.
12. As a part of data presented in support of a proposal to increase the production of DVD, the
sales manager of Laguna Suppliers reported the total additional cost required for the proposed
increase in production level. The increase in total cost is known as
A. Incremental Cost
B. Out-of-pocket cost
C. Opportunity cost
D. Controllable cost
13. An opportunity cost is
A. The difference in total costs which results from selecting one choice instead of another.
B. A cost that may be shifted to the future with little or no effect on current operations
C. A cost that may be saved by not adopting an alternative
D. The profit foregone by selecting one choice instead of another.
23. Salaries of accounts receivable clerks when one clerical worker is needed for every 750 accounts
receivable is an example of
A. Fixed cost
B. A step-variable cost
C. Mixed cost
D. Curvilinear cost
High-Low method
24. These are among the methods of segregating fixed cost and variable costs except:
A. Simple regression analysis
B. Scattergraph
C. Breakeven method
D. High-low method
25. Mat company estimated its material handling costs at two activity levels as follows:
Kilos Handled Cost
80,000 P 160,000
60,000 132,000
A. P 150,000
B. P 153,000
C. P 157,500
D. P 132,000
26. Hungarian Sausage wishes to analyze the fixed and variable components of the semi-variable
cost. The following information is available:
Month Output Costs Month Output Costs
(Units) (Units)
1 1,000 P 12,000 4 600 P 9,000
2 700 10,000 5 1,400 19,000
3 1,100 14,000 6 1,200 5,000
Scattergraph Model
27. All of the following are assumptions underlying the validity of linear regression output except
A. The errors are normally distributed and their mean is zero.
B. Certainty.
C. The variance of the errors is constant.
D. The independent variables are not correlated with each other. (cma)
28. In determining the cost behavior in business, the cost function is often expressed as Y= a + bx.
Which one of the following cost estimation methods should not be used in estimating fixed and
variable costs for the equation?
A. Graphic method.
B. Hign-and-low-point method.
C. Simple regression
D. Multiple regressions. (cma)
29. Tom Company has developed a regression equation to analyze the behavior of its maintenance
costs (Q) as a function of machine hours (Z). The following equation was developed by using 30
monthly observations with a related coefficient of determination of 0.90:
If 1,000 machine hours are worked in one month, the related point of estimate of total maintenance
costs would be
A. 11, 250
B. 10, 125
C. 5,250
D. 4,725
Questions 30 and 31 are based on the following information. The Mulvey Company derived the cost
relationship from a regression analysis of its monthly manufacturing overhead cost
C = P80, 000 + 12 M
M = machine hours
The standard error of the estimate of the regression is 6, 000. The standard time required to
manufacture one six unit case of Mulvey’s single product is 4 machine hours. Mulvey applies
manufacturing overhead to production on the basis of machine hours, and its normal annual production
is 50, 000 cases.
30. Mulvey’s estimated variable manufacturing overhead cost for a month in which scheduled
overhead is 5, 000 cases will be
A. 80, 000
B. 320, 000
C. 240, 000
D. 360, 000 (cma)
Planned Actual
Sales 800 780
Shipments 800 820
Units shipped 8, 000 9, 000
Sales P 240, 000 P 288, 000
Total pound shipped 9,400 12,800
Kgs. Shipped 4,364 5,591
The actual shipping costs for the month amounted to P 10,500. The appropriate monthly flexible
budget allowance for shipping costs for purposes of performance evaluation would be
A. P 10,250
B. P 11,075
C. P 10,340
D. P 10, 460 (rpcpa)
33. The segregation of fixed costs and variable costs is key to proper cost analysis. Regression
analysis is a technique used for this purpose. Identify the appropriate statements below on
regression analysis:
1. It assumes that a change in value of a dependent variable is related to the change in the value
of an independent variable.
2. A linear relationship between direct cost and production volume can cause a problem when
using accounting data for regression analysis.
3. It attempts to find an equation for the linear relationship among variable
4. It establishes a cause and effect relationship.
A. All four statements are appropriate.
B. Statements 1,3 and 4 only.
C. Statements 1 and 3 only
D. Statements 2 and 4 only
37. Pyramid Company has the data relating total production costs to volume for each quarter during
the past five years. During this period, production volume has varied substantially, the method
of production has been relatively unchanged and the cost behavior has been complex. What is
the most appropriate method for estimating future production cost?
A. Linear programming
B. Cost-volume-profit earnings approach
C. Time-series or trend regression analysis
D. Program evaluation review technique. (rpcpa)
38. When the relationship between the independent and dependent variable is not expected to
remain constant, an appropriate method analysis is
A. Cluster analysis
B. Curvilinear regression
C. Simple linear regression
D. Simplex linear programming
39. A division uses a regression in which monthly advertising expenditures are used to predict
monthly product sales (both in millions of dollars). The results show a regression coefficient for
the independent variable equal to 0.8. This coefficient value indicates that
A. The average monthly advertising expenditure in the sample of P800,000
B. When monthly advertising is at its average level, product sales will be P800,000
C. On average, for every additional dollar in advertising, sales increase by P.80
D. Advertising is not good predictor of sales because the coefficient is so small.
40. Quality control program employs many tools for problem definition and analysis. A scatter
diagram is one of these tools. The objective of a scatter diagram is to
A. Display a population of items for analysis.
B. Show frequency distribution in graphic form
C. Divide a universe of data into homogenous groups
D. Show the vital trend and separate trivial items. (cia)
Least-Squares method
41. The equation(s) for applying the least squares method of computation of fixed and variable
production costs can be expressed as
A. ∑xy = ax + b∑x²
B. ∑y = na + b∑²
C. b = a + bx
D. ∑XY = a∑x + b∑x²
E. ∑Y = na + b∑x (aicpa)
Questions 42 through 48 are based on the following information. Below is an examination of last year’s
financial statements of Mackenzie Park Co., which manufactures and sells trivets. Labor hours and
production cost for the last 4 months of the years, which are representative for the year, were as
follows
Labor Hours Total Production Cost
September 2,500 P 20,000
October 3,500 25,000
November 4,500 30,000
December 3,500 25,000
Totals 14,000 100,000
Based upon the information given using the least squares method of computation with letters listed
below, select the best answer for each question.
If: a = Fixed variable per month
b = Variable production cost per labor hour
n = Number of months
x = labor hours per month
y = total monthly production costs
∑ = Summation
42. The cost function derived by the simple least squares method (aicpa)
A. Is linear.
B. Must be tested for minima and maxima.
C. Is parabolic
D. Indicates maximum costs at the function’s point of inflection.
Coefficient of correlation
46. In regression analysis, the coefficient of determination is a measure of
A. The amount of variation in the dependent variable explained by the independent variables.
B. The amount of variation in the dependent variable unexplained by the independent
variables.
C. The slope of the regression line.
D. The predicted value of the independent variable. (cia)
47. Using the regression analysis, Thump Company graphed the following relationship of its cheapest
product line’s sales with its customers’ income levels:
Sales
(P)
If there is a strong statistical relationship between the sales and the customers’ income levels, which of
the following equation bet represents the correlation coefficient for this relationship?
A. -9.00
B. -0.93
C. +0.93
D. +9.00 (aicpa)
48. Omaha Company asked a CPA’s assistance in planning the use of multiple regression analysis to
predict district sales. An equation has been estimated based upon historical data, and a standard of
error has been computed. When regression analysis based upon past periods is used to predict for a
future period, the standard of error associated with the predicted value, in relation to be standard error
for the base equation, will be
A. Smaller.
B. Larger.
C. The same.
Larger or smaller, depending upon the circumstances. (aicpa)