QUESTION 3

The cost function y = 8000 + 4X:

1. has a slope coefficient of 8000.
2. is a curved line.
3. will intersect the y-axis at 4.
4. represents a mixed cost.

QUESTION 6

To complete the first set-up on a new machine took an employee 200 minutes. Using an 80% cumulative average-time learning curve indicates that the second set-up on the new machine is expected to take:

1. 60 minutes.
2. 120 minutes.
3. 80 minutes.
4. 160 minutes.

QUESTION 7

The smaller the residual term, the:

1. steeper the slope of the cost function.
2. weaker the relationship between the cost driver and costs.
3. stronger the relationship between the cost driver and costs.
4. gentler the slope of the cost function.

QUESTION 8

Learning curve effects can be incorporated:

1. into production schedules.
2. when using costs to price products.
3. into performance evaluations.
4. All of these answers are correct.

QUESTION 9

1. The ideal database contains:
2. cost driver observations spanning a wide range.
3. numerous cost driver observations.
4. reliably measured observations.
5. All of these answers are correct.

QUESTION 10

A steeply sloped regression line indicates:

1. a strong relationship between the cost driver and costs.
2. an economically plausible relationship exists.
3. a greater proportion of fixed costs than variable costs.
4. management should cut costs.

QUESTION 11

Over the short run, a non-linear cost function would MOST likely result from all of the following EXCEPT:

1. quantity discounts for each additional 10 000 parts purchased.
2. hiring a third production supervisor.
3. purchasing another $250 000 printing machine to double production.
4. incurring greater total utility costs for each machine-hour of operation.

QUESTION 12

An inaccurate cost function with a slope coefficient that is estimated too low may MOST likely result in:

1. predicting total costs that are too high.
2. promoting a product that is actually more profitable than budgeted.
3. initiating cost cutting measures when they are unnecessary.
4. evaluating a weak manager as having strong performance.

QUESTION 13

When using the high-low method, the denominator of the equation that determines the slope is the:

1. independent variable.
2. difference between the high and low observations of the dependent variables.
3. dependent variable.
4. difference between the high and low observations of the cost driver.

QUESTION 14

The cost to be predicted is referred to as the:

1. regression.
2. dependent variable.
3. cost driver.
4. independent variable.