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Intermediate Managerial Accounting > Chapter 10 MC questions > Flashcards

Chapter 10 MC questions Flashcards

1
Q

Here are 30 multiple-choice questions based on your learning objectives and notes:

  1. What does a linear cost function describe?
    A) How costs change with the level of activity.
    B) The time it takes to produce each unit.
    C) Only fixed costs.
    D) Only variable costs.
A

A

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2
Q

What does the formula Y = a + bx represent in cost estimation?
A) Y = Total cost, a = Fixed cost, b = Variable cost, X = Activity level
B) Y = Activity level, a = Total cost, b = Fixed cost
C) Y = Cost driver, a = Activity level, b = Total cost
D) Y = Variable cost, a = Fixed cost, b = Activity level

A

A

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3
Q

Here are 30 multiple-choice questions based on your learning objectives and notes:

  1. What does a linear cost function describe?
    A) How costs change with the level of activity.
    B) The time it takes to produce each unit.
    C) Only fixed costs.
    D) Only variable costs.

Answer: A

  1. What does the formula Y = a + bx represent in cost estimation?
    A) Y = Total cost, a = Fixed cost, b = Variable cost, X = Activity level
    B) Y = Activity level, a = Total cost, b = Fixed cost
    C) Y = Cost driver, a = Activity level, b = Total cost
    D) Y = Variable cost, a = Fixed cost, b = Activity level

Answer: A

  1. What does causality mean when estimating a cost function?
    A) The total cost is random.
    B) Activity levels do not affect costs.
    C) A direct link exists between activity levels and costs.
    D) Costs are always fixed
A

C

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4
Q

Which method uses the highest and lowest activity levels to estimate a cost function?
A) Regression analysis
B) High-low method
C) Visual inspection
D) Engineering estimates

A

B

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5
Q
  1. What is the first step in estimating a cost function using quantitative analysis?
    A) Collect data on both the dependent and independent variables.
    B) Plot the data.
    C) Choose the dependent and independent variables.
    D) Estimate the cost function.
A

C

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6
Q
  1. Which of the following is a nonlinear cost function?
    A) Y = a + bx
    B) Y = aX^b
    C) Y = bX
    D) Y = a + bX + C
A

B

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7
Q

What happens to unit costs as production increases according to the learning curve effect?
A) Costs remain constant.
B) Unit costs increase due to inefficiencies.
C) Unit costs decrease due to improved efficiency.
D) Costs decrease due to higher fixed costs.

A

C

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8
Q

What is the relevant range in cost behavior?
A) The range of costs that are always fixed.
B) The range of activity levels where cost behavior is predictable.
C) The range where costs are completely variable.
D) The range that only applies to fixed costs.

A

B

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9
Q

What is the primary use of a scatter plot in cost estimation?
A) To analyze statistical significance
B) To plot data points for visual inspection
C) To calculate fixed costs
D) To predict future sales

A

B

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10
Q

What does the R² value represent in regression analysis?
A) The percentage of total cost explained by the cost driver.
B) The slope of the regression line.
C) The cost driver.
D) The intercept of the regression line.

A

A

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11
Q

Which method uses all data points for estimating a cost function?
A) High-low method
B) Regression analysis
C) Visual inspection
D) Simple averaging

A

B

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12
Q

What does a high P-value (>0.05) indicate in regression analysis?
A) The relationship between the variables is statistically significant.
B) The relationship is likely random.
C) The cost driver is fixed.
D) The R² value is high.

A

B

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13
Q

What is a time driver?
A) Any factor that affects how quickly an activity happens.
B) A variable that directly influences cost.
C) A method used to estimate fixed costs.
D) A statistical analysis tool.

A

A

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14
Q

What is a common issue when collecting data for cost estimation?
A) Ensuring the data is always fixed.
B) Collecting irrelevant or inaccurate data.
C) Making sure the data only includes costs, not activities.
D) Ensuring the cost driver is constant.

A

B

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15
Q

Which of the following is NOT a type of quality cost?
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) Marketing costs

A

D

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16
Q

In a control chart, what does an observation outside the control limits indicate?
A) The variation is random.
B) The variation is non-random and requires investigation.
C) The cost driver is irrelevant.
D) The process is stable.

A

B

17
Q

What does a Pareto diagram help identify?
A) The total cost of all activities
B) The most frequent causes of defects
C) The cost behavior over time
D) The fixed costs for a company

A

B

18
Q

What is a cause-and-effect diagram also known as?
A) Fishbone diagram
B) Scatter plot
C) Control chart
D) Regression mode

A

A

19
Q

Which of the following is an example of a fixed cost?
A) Raw materials
B) Sales commissions
C) Rent
D) Wages for hourly workers

A

C

20
Q

What does the slope of a regression line represent?
A) Total fixed costs
B) The variable cost per unit of activity
C) The total cost at zero activity
D) The learning curve rate

A

B

21
Q

What is an example of a time-based measure in operations?
A) Customer-response time
B) Profit margin
C) Total cost
D) Fixed asset utilization

A

A

22
Q

What type of cost is incurred to prevent defects from occurring in the first place?
A) Prevention cost
B) Appraisal cost
C) Internal failure cost
D) External failure cost

A

A

23
Q

What does the high-low method primarily rely on?
A) Statistical models
B) Data dispersion
C) The highest and lowest activity levels
D) Regression analysis

A

C

24
Q

What does “economic plausibility” mean in cost estimation?
A) The relationship between the cost driver and cost must be reasonable and make sense.
B) The cost function must be calculated using regression.
C) The data must always come from fixed cost items.
D) The cost behavior must follow a straight line.

A

A

25
Q

What is the main purpose of regression analysis in cost estimation?
A) To calculate total cost from fixed costs
B) To determine the relationship between cost and activity level
C) To predict future sales
D) To analyze the learning curve effect

A

B

26
Q

Which of the following cost categories involves inspection of products to detect defects?
A) Prevention cost
B) Appraisal cost
C) Internal failure cost
D) External failure cost

A

B

27
Q

What does the “learning curve effect” imply?
A) Costs decrease as production increases.
B) Costs increase as production increases.
C) Fixed costs are the same across all levels of production.
D) Variable costs remain constant.

A

A

28
Q

What is a key issue with scatterplot analysis in cost estimation?
A) It requires exact predictions.
B) It relies on subjective judgment for interpretation.
C) It is based on theoretical models.
D) It only works with fixed costs.

A

B

29
Q

What is a regression model used for in cost estimation?
A) To calculate only fixed costs.
B) To identify the most frequent defects.
C) To estimate the relationship between costs and activity levels.
D) To calculate the learning curve rate

A

C

30
Q

True or False: A linear cost function describes how a cost changes with changes in the level of activity.

A

T

31
Q

True or False: In the linear cost function Y = a + bx, “a” represents the variable cost per unit of activity.

A

F

32
Q

True or False: The High-Low method uses all data points to estimate the cost function.

A

False (It only uses the highest and lowest data points)

33
Q

True or False: Regression analysis is more accurate than the High-Low method because it uses all available data points

A

True

34
Q

True or False: A learning curve effect causes unit costs to increase as production increases.

A

False (unit costs decrease as production increases)

35
Q

True or False: In cost estimation, causality means there is a direct link between the cost driver and the total costs.

A

True

36
Q

True or False: Fixed costs remain constant regardless of the level of activity.

A

True

37
Q

True or False: A scatterplot is an objective tool for interpreting the relationship between the cost driver and total costs.

A

Answer: False (It is subjective and relies on visual judgment)

38
Q

True or False: Time is often a cost driver, affecting the speed and efficiency of production processes.

A

True

39
Q

True or False: Pareto diagrams help to identify the least frequent defects in a process.

A

False
(They identify the most frequent defects)

Intermediate Managerial Accounting (7 decks)

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