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MULTIPLE CHOICE QUESTIONS
Cost concepts and classification
1. Wages paid to factory machine operators of a manufacturing plant are an
element of
Prime Conversion
cost
cost
A.
No
No
B.
No
Yes
C.
Yes
No
D.
Yes
Yes
2. Direct materials are a
Conversion Cost
A.
Yes
B.
Yes
C.
No
D.
No
Manufacturing Cost
Yes
Yes
Yes
No
Prime Cost
No
Yes
Yes
No
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.
14.Controllable costs are
A. Costs are likely to respond to the amount of attention devoted to them by
a specified manager.
B. Costs that are governed mainly by past decisions that established the
present levels of operating and organizational capacity and that only
charge slowly in response to small change in capacity
C. Cost that fluctuate in total in response to small changes in rate of
utilization capacity
D. Costs that management decides to incur in the current period to enable
the company to achieve objectives other than the filling orders placed by
customers
E. Costs that will be unaffected by current managerial decisions
15.An avoidable cost is
A. The profit foregone by selecting one choice instead of another
B. A cost that does not entail any peso outlay but is relevant in the decisionmaking process
C. A cost that continues to be incurred even though there is no activity
D. A cost that may be saved by not adopting an alternative
E. A cost common to all choices in question and not clearly or practically
allocable to all of them
16.The term discretionary cost refers to
A. Costs are likely to respond to the amount of attention devoted to them by a
specified manager.
B. Costs that are governed mainly by past decisions that established the present
levels of operating and organizational capacity and that only charge slowly in
response to small change in capacity
C. Amortization of costs that were capitalized in previous periods.
D. Costs that management decides to incur in the current period to enable the
company to achieve objectives other than the filling orders placed by
customers
E. Costs that will be unaffected by current managerial decisions
17.An imputed cost is
A. A cost that may be shifted to the future with little or no effect on current
operations
B. A cost that cannot be avoided because it has already been incurred
C. A cost that does not entail any peso outlay but which is relevant to the
decision making process.
D. The difference in total costs that results from selecting one choice instead
of another.
E. A cost that continues to be incurred even though there is no activity.
A.
B.
C.
D.
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
What is Mats estimated cost of handling 75,000 kilos?
A.
B.
C.
D.
P
P
P
P
150,000
153,000
157,500
132,000
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.
B.
C.
D.
Graphic method.
Hign-and-low-point method.
Simple regression
Multiple regressions. (cma)
11, 250
10, 125
5,250
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
If: C = monthly manufacturing overhead cost
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 Mulveys 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.
Planned
800
800
8, 000
P 240, 000
9,400
4,364
Actual
780
820
9, 000
P 288, 000
12,800
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
34.Simple regression analysis involves the use of
Dependent variables
Independent variables
A.
One
None
B.
One
One
C.
One
Two
D.
None
Two (cma/aicpa)
35.Regression analysis is
A. Estimates the independent cost variable.
B. Uses probability assumptions to determine total project costs.
C. Estimated the dependent cost variable
D. Ignores the coefficient of determination
E. Encompasses factors outside the relevant range.
36.Multiple regression analysis
A.
B.
C.
D.
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 + bx
B. y = na + b
C. b = a + bx
D. XY = ax + bx
E. Y = na + bx (aicpa)
Coefficient
2.500
5.0
0.70
DM weight
Y intercept
b
r2
Coefficient
4.600
2.60
0.50
A.
B.
C.
D.
Y = 2, 500 + 5.0x
Y= 4, 600 + 2.6x
Y = 2,500 + 3.5x
Y = 4, 600 + 1.3x (aicpa)
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 lines sales with its customers income levels:
Sales
(P)