Chapter 8

Question 1

Which of the four types of cost drivers-activity-based, volume-based, structural and executional-are often best related to linear cost estimation methods?

Answer 1

activity based and volume based

Question 2

The identification of cost drivers is perhaps the most important step in developing the cost estimate because:

Answer 2

There may be a number of relevant drivers, some not immediately obvious.

Question 3

Data collected on the cost objects and cost drivers for cost estimation must be:

Answer 3

Consistent and accurate

Question 4

Selection and employment of the correct estimation method is:

Answer 4

Dependent on the accuracy/cost tradeoff for the estimation objectives.

Question 5

Regression analysis is better than the high-low method of cost estimation because regression analysis:

Answer 5

can provide greater precision and reliability

Question 6

hen there are two or more cost drivers, regression is termed:

Answer 6

multiple

Question 7

The independent variable in regression analysis is:

Answer 7

The cost driver used to estimate the value of the dependent variable.

Question 8

A variable used in regression analysis that represents the presence or absence of a condition, e.g., seasonality, is called a(n):

Answer 8

dummy variable

Question 9

An R-squared value that approaches one (1.0) would indicate:

Answer 9

high degree of explanatory power

Question 10

The learning curve in cost estimation is a good example of:

Answer 10

non-linear cost behavior

Question 11

A p-value of less than __________blank is typically considered statistically significant.

Answer 11

0.05

Question 12

What is the effect of multicollinearity in regression estimates?

Answer 12

The coefficients for the independent variables are unreliable.