129. Total costs may be computed as follows:
130. Amigos Industries analyzed the relationship between total factory overhead and changes in direct labor
hours. It found the following:
Y = $6,000 + $6X
The Y in the equation is an estimate of
131. Assume the following information:
Volume
Total Cost
90 units
$1,200
98 units
$1,300
106 units
$1,400
What is the variable cost per unit?
132. The following cost functions were developed for manufacturing overhead costs:
Manufacturing Overhead Cost
Cost Function
Electricity
$200 + $20 per direct labor hour
Maintenance
$400 + $30 per direct labor hour
Supervisors’ salaries
$20,000 per month
Indirect materials
$16 per direct labor hour
If January production is expected to be 2,000 units requiring 3,000 direct labor hours, estimated manufacturing overhead costs would be
133. Advantages of the method of least squares over the high-low method include all of the following EXCEPT
134. Weaknesses of the high-low method include all of the following EXCEPT
135. The high-low method may give unsatisfactory results if
136. Figure 3-4
The following information is available for electricity costs for the last six months of the year:
M
o
n
t
h
Production Volume
Electricity Costs
January
1,400
$2,200
February
2,800
5,400
March
3,200
5,700
April
1,750
3,900
May
1,200
2,400
June
2,100
4,050
Refer to Figure 3-4. Using the high-low method, estimated variable cost per unit of production is
137. Figure 3-4
The following information is available for electricity costs for the last six months of the year:
M
o
n
t
h
Production Volume
Electricity Costs
January
1,400
$2,200
February
2,800
5,400
March
3,200
5,700
April
1,750
3,900
May
1,200
2,400
June
2,100
4,050
Refer to Figure 3-4. What are the fixed costs?
138. The following information was available about supplies cost for the second quarter of the year:
Month
Production Volume
Supplies Cost
July
700
$3,185
August
1,600
7,100
September
600
2,700
Using the high-low method, the estimate of supplies cost at 1,000 units of production is
139. Stanfil Corporation developed a cost function for manufacturing overhead costs of
Y = $8,000 + $1.60X. Estimated manufacturing overhead costs at 10,000 units of production are
140. Barron Enterprises has the following information about its truck fleet miles and operating costs:
Year
Miles
Operating Costs
2014
400,000
$256,000
2015
480,000
280,000
2016
560,000
320,000
What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2017 is 500,000 miles?
141. The Ladder Company wants to develop a cost estimating equation for its monthly cost of electricity. It has
the following data:
Month
Cost of Electricity
Direct Labor Hours
February
$ 8,100
750
May
9,000
850
August
10,200
1,000
November
8,700
800
Using the high-low method, which of the following is the best equation?
142. Figure 3-5
Longberry Corporation manufactures and sells party items. The following representative direct labor hours and
production costs are provided for a four-month period:
Month
Direct Labor Hours
Production Costs
May
3,600
$15,000
June
4,800
17,500
July
6,000
20,000
August
4,800
17,500
Total
19,200
$70,000
Let
a
=
Fixed production costs per month
b
=
Variable production costs per direct labor hour
n
=
Number of months
X
=
Direct labor hours per month
Y
=
Total monthly production costs
S
=
Summation
Refer to Figure 3-5. The monthly production cost can be expressed as
143. Figure 3-5
Longberry Corporation manufactures and sells party items. The following representative direct labor hours and
production costs are provided for a four-month period:
Month
Direct Labor Hours
Production Costs
May
3,600
$15,000
June
4,800
17,500
July
6,000
20,000
August
4,800
17,500
Total
19,200
$70,000
Let
a
=
Fixed production costs per month
b
=
Variable production costs per direct labor hour
n
=
Number of months
X
=
Direct labor hours per month
Y
=
Total monthly production costs
S
=
Summation
Refer to Figure 3-5. Using the high-low method, what is the cost formula for estimating costs?
144. Figure 3-5
Longberry Corporation manufactures and sells party items. The following representative direct labor hours and
production costs are provided for a four-month period:
Month
Direct Labor Hours
Production Costs
May
3,600
$15,000
June
4,800
17,500
July
6,000
20,000
August
4,800
17,500
Total
19,200
$70,000
Let
a
=
Fixed production costs per month
b
=
Variable production costs per direct labor hour
n
=
Number of months
X
=
Direct labor hours per month
Y
=
Total monthly production costs
S
=
Summation
Refer to Figure 3-5. Predict a cost for 5,000 labor hours.
145. The cost function derived by the least-squares cost estimation method
146. The scatterplot method of cost estimation
147. The following information was taken from a computer printout generated with the least-squares method for
use in estimating overhead costs:
Slope
45
Intercept
5,700
Correlation coefficient
.72
Activity variable
Direct labor hours
The cost formula is
148. Which of the following is an advantage of using the scatterplot method over the high-low method to
estimate costs?
149. Spokane Corporation found its maintenance cost and sales dollars to be somewhat correlated. Last year’s
high and low observations were as follows:
Maintenance Cost
Sales
$46,000
$600,000
$52,000
$800,000
What is the fixed portion of the maintenance cost?
150. In the method of least squares, the deviation is the difference between the
151. Figure 3-6
The Stanford Company incurred the following maintenance cost during a five month period:
Month
Production Volume
Maintenance Costs
June
75
$250
July
115
310
August
190
400
September
60
240
October
135
355
Refer to Figure 3-6. Using a computer or calculator, compute the estimate of variable cost per unit of production using the method of least squares.
Rounded to two decimal places, this value would be
152. Figure 3-6
The Stanford Company incurred the following maintenance cost during a five month period:
Month
Production Volume
Maintenance Costs
June
75
$250
July
115
310
August
190
400
September
60
240
October
135
355
Refer to Figure 3-6. Using a computer or calculator, compute the estimate of the fixed portion of maintenance costs using the method of least
squares. Rounded to dollars, this value would be
153. Figure 3-6
The Stanford Company incurred the following maintenance cost during a five month period:
Month
Production Volume
Maintenance Costs
June
75
$250
July
115
310
August
190
400
September
60
240
October
135
355
Refer to Figure 3-6. Using a computer or calculator, compute the estimate of maintenance costs at 100 units of production using the method of least
squares. This value would be
154. The hypothesis test of cost parameters
155. The coefficient of determination is
156. Figure 3-7
The following computer printout estimated overhead costs using regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
100.41
4.81
0.0003
20.88
DLH
14.05
6.78
0.0001
2.07
R Square (R2)
0.80
Standard Error (Se)
25.03
Observations
17
Please find the following statistical table
degrees
of freedom
90%
95%
99%
degrees of
freedom
90%
95%
99%
1
6.314
12.708
63.657
11
1.796
2.201
3.106
2
2.920
4.303
9.925
12
1.782
2.179
3.055
3
2.353
3.182
5.841
13
1.771
2.160
3.055
4
2.132
2.776
4.604
14
1.761
2.145
3.012
5
2.015
2.571
4.032
15
1.753
2.131
2.947
6
1.943
2.447
3.707
16
1.746
2.120
2.921
7
1.895
2.365
3.499
17
1.740
2.110
2.898
8
1.860
2.306
3.355
18
1.734
2.101
2.878
9
1.833
2.262
3.250
19
1.729
2.093
2.861
10
1.812
2.228
3.169
20
1.725
2.086
2.845
During the last accounting period 10,000 DLH were worked.
Refer to Figure 3-7. What is the model?
157. Figure 3-7
The following computer printout estimated overhead costs using regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
100.41
4.81
0.0003
20.88
DLH
14.05
6.78
0.0001
2.07
R Square (R2)
0.80
Standard Error (Se)
25.03
Observations
17
Please find the following statistical table
degrees
of freedom
90%
95%
99%
degrees of
freedom
90%
95%
99%
1
6.314
12.708
63.657
11
1.796
2.201
3.106
2
2.920
4.303
9.925
12
1.782
2.179
3.055
3
2.353
3.182
5.841
13
1.771
2.160
3.055
4
2.132
2.776
4.604
14
1.761
2.145
3.012
5
2.015
2.571
4.032
15
1.753
2.131
2.947
6
1.943
2.447
3.707
16
1.746
2.120
2.921
7
1.895
2.365
3.499
17
1.740
2.110
2.898
8
1.860
2.306
3.355
18
1.734
2.101
2.878
9
1.833
2.262
3.250
19
1.729
2.093
2.861
10
1.812
2.228
3.169
20
1.725
2.086
2.845
During the last accounting period 10,000 DLH were worked.
Refer to Figure 3-7. The coefficient of determination in this model tells us that
158. Figure 3-7
The following computer printout estimated overhead costs using regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
100.41
4.81
0.0003
20.88
DLH
14.05
6.78
0.0001
2.07
R Square (R2)
0.80
Standard Error (Se)
25.03
Observations
17
Please find the following statistical table
degrees
of freedom
90%
95%
99%
degrees of
freedom
90%
95%
99%
1
6.314
12.708
63.657
11
1.796
2.201
3.106
2
2.920
4.303
9.925
12
1.782
2.179
3.055
3
2.353
3.182
5.841
13
1.771
2.160
3.055
4
2.132
2.776
4.604
14
1.761
2.145
3.012
5
2.015
2.571
4.032
15
1.753
2.131
2.947
6
1.943
2.447
3.707
16
1.746
2.120
2.921
7
1.895
2.365
3.499
17
1.740
2.110
2.898
8
1.860
2.306
3.355
18
1.734
2.101
2.878
9
1.833
2.262
3.250
19
1.729
2.093
2.861
10
1.812
2.228
3.169
20
1.725
2.086
2.845
During the last accounting period 10,000 DLH were worked.
Refer to Figure 3-7. The hypothesis tests of the cost parameters indicate(s) that
159. Figure 3-7
The following computer printout estimated overhead costs using regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
100.41
4.81
0.0003
20.88
DLH
14.05
6.78
0.0001
2.07
R Square (R2)
0.80
Standard Error (Se)
25.03
Observations
17
Please find the following statistical table
degrees
of freedom
90%
95%
99%
degrees of
freedom
90%
95%
99%
1
6.314
12.708
63.657
11
1.796
2.201
3.106
2
2.920
4.303
9.925
12
1.782
2.179
3.055
3
2.353
3.182
5.841
13
1.771
2.160
3.055
4
2.132
2.776
4.604
14
1.761
2.145
3.012
5
2.015
2.571
4.032
15
1.753
2.131
2.947
6
1.943
2.447
3.707
16
1.746
2.120
2.921
7
1.895
2.365
3.499
17
1.740
2.110
2.898
8
1.860
2.306
3.355
18
1.734
2.101
2.878
9
1.833
2.262
3.250
19
1.729
2.093
2.861
10
1.812
2.228
3.169
20
1.725
2.086
2.845
During the last accounting period 10,000 DLH were worked.
Refer to Figure 3-7. Find the t-value for a 90 percent confidence level.
160. Figure 3-7
The following computer printout estimated overhead costs using regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
100.41
4.81
0.0003
20.88
DLH
14.05
6.78
0.0001
2.07
R Square (R2)
0.80
Standard Error (Se)
25.03
Observations
17
Please find the following statistical table
degrees
of freedom
90%
95%
99%
degrees of
freedom
90%
95%
99%
1
6.314
12.708
63.657
11
1.796
2.201
3.106
2
2.920
4.303
9.925
12
1.782
2.179
3.055
3
2.353
3.182
5.841
13
1.771
2.160
3.055
4
2.132
2.776
4.604
14
1.761
2.145
3.012
5
2.015
2.571
4.032
15
1.753
2.131
2.947
6
1.943
2.447
3.707
16
1.746
2.120
2.921
7
1.895
2.365
3.499
17
1.740
2.110
2.898
8
1.860
2.306
3.355
18
1.734
2.101
2.878
9
1.833
2.262
3.250
19
1.729
2.093
2.861
10
1.812
2.228
3.169
20
1.725
2.086
2.845
During the last accounting period 10,000 DLH were worked.
Refer to Figure 3-7. What is the confidence interval for the predicted overhead cost rounded to the nearest whole number for a 90 percent
confidence level?
161. A coefficient of determination of 0.91 means
162. What is the difference between a correlation equal to -1 and a correlation equal to 0?
163. A managerial accountant has determined the following relationships between overhead and several
possible bases:
Basis
Correlation with Total Overhead
Direct labor hours
0.842
Direct labor dollars
0.279
Machine hours
-0.837
Employee minutes in coffee breaks
-0.243
The best basis for overhead application is
164. What is the difference between a correlation equal to -1 and a correlation equal to +1?
165. What does a correlation coefficient near +1 mean?
166. The appropriate range for the coefficient of correlation (r) is
167. What does a correlation coefficient near 0 mean?
168. Which of the following statements is NOT true?
169. What does a correlation coefficient near -1 mean?
170. The confidence interval for the predicted value of Y
171. The following data is available of estimated overhead costs using linear regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
100.41
4.81
0.0003
20.88
DLH
14.05
6.78
0.0001
2.07
R Square (R 2)
0.80
Standard Error (Se)
25.03
Observations
17
Table of Selected Values: t Distribution
Degrees of Freedom
90%
95%
99%
15
1.753
2.131
2.947
16
1.746
2.120
2.921
17
1.740
2.110
2.898
18
1.734
2.101
2.878
19
1.729
2.093
2.861
What is the interval around Y if 95 percent confidence is desired?
172. Figure 3-8
The following computer printout estimated overhead costs using multiple regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
1000
1.96
0.0250
510.204
Setup hours
25
81.96
0.0001
0.305
# of parts
100
9.50
0.0001
10.527
R Square (R2)
0.94
Standard Error (Se)
75.00
Observations
160
During the year the company used 1,000 setup hours and 500 parts.
Refer to Figure 3-8. The degrees of freedom for the model is
173. Figure 3-8
The following computer printout estimated overhead costs using multiple regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
1000
1.96
0.0250
510.204
Setup hours
25
81.96
0.0001
0.305
# of parts
100
9.50
0.0001
10.527
R Square (R2)
0.94
Standard Error (Se)
75.00
Observations
160
During the year the company used 1,000 setup hours and 500 parts.
Refer to Figure 3-8. Which slope and intercept parameters are significant at the 0.05 level?
174. Figure 3-8
The following computer printout estimated overhead costs using multiple regression:
t for H(0)
Std. error
Parameter
Estimate
Parameter = 0
Pr > t
of parameter
Intercept
1000
1.96
0.0250
510.204
Setup hours
25
81.96
0.0001
0.305
# of parts
100
9.50
0.0001
10.527
R Square (R2)
0.94
Standard Error (Se)
75.00
Observations
160
During the year the company used 1,000 setup hours and 500 parts.
Refer to Figure 3-8. The model being measured is