EXAM 2

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?
A). Activity-based only.
B). Activity-based and volume-based.
C). Structural and volume-based.
D). Executional and volume-based.
E). Structural and executional.

Answer 1

B

Question 2

Which of the following is not considered as part of step 6 in cost estimation?
A). The consistency and accuracy of data selected.
B). The precision of the method selected.
C). The study of the graphs.
D). The definition of the cost object.
E). The completeness and appropriateness of cost drivers selected.

Answer 2

D

Question 3

The identification of cost drivers is perhaps the most important step in developing the cost estimate because:
A). It is the first step in cost estimation.
B). It is the final step in cost estimation.
C). There may be a number of relevant drivers, some not immediately obvious.
D). The other steps are easier to execute.
E). It requires much more time than the other steps.

Answer 3

C

Question 4

Technology and complexity issues often lead management to simplify and to:
A). Use linear estimation methods.
B). Use volume-based costing and nonlinear estimation methods.
C). Use volume-based costing methods.
D). Use nonlinear estimation methods.
E). Use activity-based costing and volume-based costing methods.

Answer 4

A

Question 5

Data collected on the cost objects and cost drivers for cost estimation must be:
A). Brief and limited.
B). Exhaustive.
C). Concrete.
D). Consistent and accurate.
E). Varied.

Answer 5

D

Question 6

Data on cost objects and cost drivers must be:
A). Consistent and accurate.
B). Clean and understandable.
C). Comprehensive and effi cient.
D). Accurate and comprehensive.
E). Clean and consistent.

Answer 6

A

Question 7

Selection and employment of the correct estimation method is:
A). Easy once the data is gathered.
B). Relatively easy because only two effective methods exist.
C). Dependent on the accuracy/cost tradeoff for the estimation objectives.
D). Primarily subjective in nature.
E). Difficult because so many effective methods are available

Answer 7

B

Question 8

Regression analysis is better than the high-low method of cost estimation because regression analysis:
Is mathematical.
Can provide greater precision and reliability.
Fits data into a mathematical equation.
Takes less time.
Is a statistical method.

Question 9

When there are two or more cost drivers, regression is termed:
A). Simple.
B). Binary.
C). Multiple.
D). Curvilinear.
E). Synergistic.

Answer 9

C

Question 10

The independent variable in regression analysis is:
A). The cost to be estimated.
B). The cost driver used to estimate the value of the dependent variable.
C). Hard to defi ne because of its independence.
D). Usually expressed as a range of values.
E). Always a volume-based cost driver.

Answer 10

B

Question 11

High-low and regression cost estimation methods are alike in that they both:
A). Have an intercept term and a slope term.
B). Have an intercept term but not a slope term.
C). Have a slope term but not an intercept term.
D). Use all data points.
E). Use only a few selected data points.

Answer 11

A

Question 12

What is the difference between a simple linear regression and a multiple linear regression?
A). Multiple has more than one dependent variable.
B). Simple has a single independent variable.
C). Simple has more than one dependent variable.
D). There is no difference.
E). Multiple always includes a dummy variable.

Answer 12

B

Question 13

A variable used in regression analysis that represents the presence or absence of a condition, e.g., seasonality, is called a(n):
A). Random variable.
B). Dummy variable.
C). Constant term variable.
D). Correlating variable.
E). Fixed term variable.

Answer 13

B

Question 14

An R-squared value that approaches one (1.0) would indicate:
A). An average degree of explanatory power.
B). A low degree of explanatory power.
C). A high degree of explanatory power.
D). The presence of outliers.
E). The absence of outliers.

Answer 14

C

Question 15

Extending the length of a time period in cost estimation will result in:
A). Fewer recording lags or cut-off errors.
B). Confounding data.
C). Increasing the explanatory power of the data.
D). Better results because more data is being used.
E). More recording lags or cut-off errors.

Answer 15

A

Question 16

The learning curve in cost estimation is a good example of:
A). Non-linear cost behavior.
B). Machine-intensive production.
C). Simple regression.
D). A random variable.
E). Efficient labor.

Answer 16

A

Question 17

Why use the high-low method?
A). It is easiest to understand and apply.
B). It is the most accurate.
C). It has greater computational complexity.
D). It requires more expertise.
E). It is the least accurate.

Answer 17

A

Question 18

In least squares regression analysis, the cost to be estimated is the:
A). Independent variable.
B). Dependent variable.
C). Cost object
D). Outlier.
E). Dummy variable.

Answer 18

B

Question 19

Which one the following is a variable that takes on values of 1, 2, 3, … for each period in sequence?
A). Dummy variable.
B). Price change index.
C). Trend variable.
D). Dependent variable.
E). Independent variable.

Answer 19

C