Question 1
Within the linear cost function y = a + bx, the ________,
- Selected: b term is the slope coefficient.This answer is correct.
- a term is the slope coefficient.
- x term is the slope coefficient.
- y term is the slope coefficient.
Correct! The b term is the slope coefficient.
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Question 2
True or False: A fixed cost for a leased manufacturing facility will be represented on a cost graph by a line that is parallel to the y-axis.
- True
- Selected:FalseThis answer is correct.
Correct! A fixed cost is represented by a line that is parallel to the x-axis.
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Question 3
Swiss Chocolate Manufacturing Company manufactures luxury handmade boxed truffles. The company notes the following information for overhead for daily production:
| Volume | Total cost |
| 800 units | $1,200 |
| 880 units | $1,300 |
| 960 units | $1,400 |
Utilizing the high-low method to determine the overhead cost formula for Swiss Chocolate Manufacturing Company, the correct calculation is ________.
- y = $100 + $1.50 x
- Selected: y = $100 + $1.48 xThis answer is incorrect.
- y = $100 + $1.38 x
- y = $100 + $1.25 x
Reconsider your response. Review Chapter 10 in your text and the example in Module 7; page II, the review of the high-low method.
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Question 4
Within the linear cost function y = a + bx ________.
- the b term is the dependent variable.
- the a term is the dependent variable.
- the x term is the dependent variable.
- Selected: the y term is the dependent variable.This answer is correct.
Correct! The y term is the dependent variable.
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Question 5
The following chart depicts the relationship between Swiss Chocolate Manufacturing Company’s labor hours incurred and overhead costs incurred for the first half of the year.
| Month | Labor Hours | Overhead Costs | ||
| January | 2,240 | $ 9,954 | ||
| February | 2,600 | $10,250 | ||
| March | 1,520 | $6,850 | ||
| April | 2,700 | $11,640 | ||
| May | 3,080 | $11,125 | ||
| June | 2,625 | $11,500 | ||
Using the high-low method, the calculation for the cost formula for Swiss Chocolate Manufacturing Company’s overhead costs is ________.
- y = $6850 + $1.74 x
- y = $4164.80 + $2.74 x
- Selected: y = $6850 + $2.74 xThis answer is incorrect.
- y = $4164.80 + $1.74 x
Reconsider your response. Review Module 7, Page II. Follow the example for the calculation of the high-low method cost formula, first obtaining the slope and then the fixed cost.
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Question 6
True or False: Variable costing income statements emphasizing contribution margin are disseminated to shareholders frequently.
No answer provided
- True
- False
Reconsider your response. Review the information in Module 7, Page I. Note that only GAAP compliant income statements are disseminated externally. Which type of income statements are these?
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Question 7
The Swiss Chocolate Manufacturing Company manufactures chocolate truffles. A regression analysis of electricity cost reveals the following:
| Coefficients | Standard error | t Stat | P-value | ||
| Intercept | 1805.36 | 945.098 | 1.910233 | 0.088428663 | |
| Electricity cost | 3.63 | 0.339188 | 10.68839 | 0.00000205 | |
Is the intercept for Swiss Chocolate Manufacturing Company’s formula for electricity cost significant at the 95% confidence level?
- yes, because the p-value of approximately .09 is greater than .05, which is the reference amount
- Selected: no, because the p-value of approximately .09 is greater than .05, which is the reference amountThis answer is correct.
- yes, because the p-value of approximately .00 is less than .05, which is the reference amount
- no, because the p-value of approximately .00 is less than .05, which is the reference amount
Correct! The p-value for the intercept is approximately .09, and the reference amount is 100% – 95% or .05. Since the p-value is larger, the intercept is not significant in explaining the relationship for electricity cost.
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Question 8
True or False: The lower the r-squared value of a regression equation, the better the fit of the regression line to the data, as it is an indication that the variances are minimized.
- True
- Selected:FalseThis answer is correct.
Correct! The higher the r-squared value of a regression equation, the better the fit of the regression line is to the data.
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Question 9
True or False: If the actual volume is less than the static budget volume, the production volume variance will be favorable since the amount allocated will also be less.
- TrueThis answer is incorrect.
- False
Reconsider your response. Review Module 7, Page I.
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Question 10
A (some) limitation(s) of the regression analysis is (are) ________.
- that all of the points are considered in the calculation versus all of the points in the data set
- that the underlying relationship between variables may change, rendering the equation less accurate in depicting the relationships between variables
- Selected: neither a nor bThis answer is incorrect.
- both a and b
Reconsider your response. Read Chapter 10 of your text and review Module 7, Page III.
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Question 1
True or False: The lower the r-squared value of a regression equation, the better the fit of the regression line to the data, as it is an indication that the variances are minimized.
- True
- Selected:FalseThis answer is correct.
Correct! The higher the r-squared value of a regression equation, the better the fit of the regression line is to the data.
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Question 2
Swiss Chocolate Manufacturing Company employs one supervisor for every six employees in its packaging area; if seven to 12 employees are working, another supervisor is called in, etc. The associated cost behavior is a ________.
- fixed cost
- variable cost
- step cost
- Selected: mixed costThis answer is incorrect.
Reconsider your response. Review Chapter 10 of your text. When there is a one-to-many relationship over the relevant range, what type of cost behavior results?
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Question 3
True or False: When ending inventory is greater than beginning inventory, variable costing operating income will be lower than absorption costing operating income.
- Selected:TrueThis answer is correct.
- False
Correct! When ending inventory increases relative to beginning inventory, more overhead will be capitalized on the balance sheet. As a result, absorption income will be higher.
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Question 4
Swiss Chocolate Manufacturing Company performs a regression analysis and notes a mixed cost function characterizes the behavior of utilities expenses. This indicates that ________.
- electricity contains both absorption and variable costs
- electricity costs are manageable
- Selected: electricity contains both fixed and variable costsThis answer is correct.
- electricity costs are not manageable
Correct! Mixed costs are characterized by both fixed and variable behavior.
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Question 5
The following chart depicts the relationship between Swiss Chocolate Manufacturing Company’s labor hours incurred and overhead costs incurred for the first half of the year.
| Month | Labor Hours | Overhead Costs | ||
| January | 2,240 | $ 9,954 | ||
| February | 2,600 | $10,250 | ||
| March | 1,520 | $6,850 | ||
| April | 2,700 | $11,640 | ||
| May | 3,080 | $11,125 | ||
| June | 2,625 | $11,500 | ||
Using the high-low method, the calculation for the cost formula for Swiss Chocolate Manufacturing Company’s overhead costs is ________.
- y = $6850 + $1.74 x
- Selected: y = $4164.80 + $2.74 xThis answer is correct.
- y = $6850 + $2.74 x
- y = $4164.80 + $1.74 x
Correct! Use the high and the low volumes to drive your calculation. The variable cost calculation is: change in y (total cost) / change in x (volume) = ($11,125 – $6,850)/(3,080 – 1,520) = $4,275/1,560 = $2.74 per unit. Then, plug the $2.74 into the equation to find the fixed cost, using the high or low point selected. Using the low: $6,850 = a + (1,520 x $2.74) = $6,850 = a + $4,164.80. Hence, a = $2,685.20.
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Question 6
Twisty Taffy Company manufactures bags of saltwater taffy shipped on pallets; the company was incorporated in 2015. The company actual and static budget volume was 200,000 pallets of product in its first year of operations. Variable manufacturing costs were $30 per pallet of product. Actual and static budget fixed manufacturing costs were $600,000, and selling and general costs were $400,000 in 2015. Twisty Taffy sold 120,000 pallets in 2015 for $40 per pallet. Twisty Taffy’s 2015 absorption costing operating income is ________.
- Selected: $840,000.This answer is incorrect.
- $800,000.
- $440,000.
- $200,000.
Reconsider your response. Review Module 7, Page I. Review the calculations and recompute your answer.
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Question 7
The Swiss Chocolate Manufacturing Company manufactures chocolate truffles. A regression analysis of electricity cost reveals the following:
| Coefficients | Standard error | t Stat | P-value | ||
| Intercept | 1805.36 | 945.098 | 1.910233 | 0.088428663 | |
| Electricity cost | 3.63 | 0.339188 | 10.68839 | 0.00000205 | |
Is the intercept for Swiss Chocolate Manufacturing Company’s formula for electricity cost significant at the 95% confidence level?
- yes, because the p-value of approximately .09 is greater than .05, which is the reference amount
- Selected: no, because the p-value of approximately .09 is greater than .05, which is the reference amountThis answer is correct.
- yes, because the p-value of approximately .00 is less than .05, which is the reference amount
- no, because the p-value of approximately .00 is less than .05, which is the reference amount
Correct! The p-value for the intercept is approximately .09, and the reference amount is 100% – 95% or .05. Since the p-value is larger, the intercept is not significant in explaining the relationship for electricity cost.
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Question 8
A (some) limitation(s) of the high-low method is (are) ________.
- that only two points are considered in the calculation versus all of the points in the data set
- that the two points chosen may both be outliers and not represent the relationship between the dependent and independent variables
- neither a nor b
- Selected: both a and bThis answer is correct.
Correct! The limitations of the high-low method are that only two points of a potentially large array of data are used to develop the equation, and that those two points may be outliers and not represent the relationship appropriately.
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Question 9
Swiss Chocolate Manufacturing Company manufactures luxury handmade boxed truffles. The company notes the following information for overhead for daily production:
| Volume | Total cost |
| 800 units | $1,200 |
| 880 units | $1,300 |
| 960 units | $1,400 |
Utilizing the high-low method to determine the overhead cost formula for Swiss Chocolate Manufacturing Company, the correct calculation is ________.
- y = $100 + $1.50 x
- y = $100 + $1.48 x
- Selected: y = $100 + $1.38 xThis answer is incorrect.
- y = $100 + $1.25 x
Reconsider your response. Review Chapter 10 in your text and the example in Module 7; page II, the review of the high-low method.
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Question 10
True or False: A variable direct cost of sugar for a candy manufacturer will be represented on a cost graph by a line that runs from northwest to southeast, and has a negative slope.
- True
- Selected:FalseThis answer is correct.
Correct! A variable cost that increases in coordination the number of units produced is depicted by a line that runs from southwest to northeast, and has a positive slope.
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Question 1
Twisty Taffy Company’s management accountant generated the following analysis. The regression being for use in estimating overhead costs:
| Slope | 45 |
| Intercept | 5,700 |
| Correlation coefficient | .72 |
| Independent variable | Direct labor hours |
The cost formula for overhead cost based on this data is ________.
- y = $5,700 – $45x
- Selected: y = $5,700 + $45xThis answer is correct.
- y = $5,700 + ($45 – 0.72)
- y = $5,700 – 0.72
Correct! The formula takes the form y = a + bx.
y= 5,700 (intercept) + 45 (slope) x
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Question 2
True or False: A fixed cost for a leased manufacturing facility will be represented on a cost graph by a line that is parallel to the y-axis.
- True
- Selected:FalseThis answer is correct.
Correct! A fixed cost is represented by a line that is parallel to the x-axis.
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Question 3
A (some) limitation(s) of the regression analysis is (are) ________.
- that all of the points are considered in the calculation versus all of the points in the data set
- that the underlying relationship between variables may change, rendering the equation less accurate in depicting the relationships between variables
- neither a nor b
- Selected: both a and bThis answer is incorrect.
Reconsider your response. Read Chapter 10 of your text and review Module 7, Page III.
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Question 4
Swiss Chocolate Manufacturing Company employs one supervisor for every six employees in its packaging area; if seven to 12 employees are working, another supervisor is called in, etc. The associated cost behavior is a ________.
- fixed cost
- variable cost
- Selected: step costThis answer is correct.
- mixed cost
Correct! This is an example of a step cost. It is a one-to-many relationship, which will increase in a block pattern on a graph when the next supervisor is called in.
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Question 5
True or False: If the actual volume is less than the static budget volume, the production volume variance will be favorable since the amount allocated will also be less.
- True
- Selected:FalseThis answer is correct.
Correct! When the actual volume is less than the production volume, the production volume variance will be unfavorable as the amount allocated will be less, resulting in underallocation.
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Question 6
Twisty Taffy Company manufactures bags of saltwater taffy shipped on pallets; the company was incorporated in 2015. The company actual and static budget volume was 200,000 pallets of product in its first year of operations. Variable manufacturing costs were $30 per pallet of product. Actual and static budget fixed manufacturing costs were $600,000, and selling and general costs were $400,000 in 2015. Twisty Taffy sold 120,000 pallets in 2015 for $40 per pallet. Twisty Taffy’s 2015 absorption costing operating income is ________.
- $840,000.
- Selected: $800,000.This answer is incorrect.
- $440,000.
- $200,000.
Reconsider your response. Review Module 7, Page I. Review the calculations and recompute your answer.
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Question 7
Swiss Chocolate Manufacturing Company performs a regression analysis and notes a mixed cost function characterizes the behavior of utilities expenses. This indicates that ________.
- electricity contains both absorption and variable costs
- electricity costs are manageable
- Selected: electricity contains both fixed and variable costsThis answer is correct.
- electricity costs are not manageable
Correct! Mixed costs are characterized by both fixed and variable behavior.
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Question 8
Twisty Taffy Company manufactures bags of saltwater taffy shipped on pallets; the company was incorporated in 2015. The company actual and static budget volume was 200,000 pallets of product in its first year of operations. Variable manufacturing costs were $30 per pallet of product. Actual and static budget fixed manufacturing costs were $600,000, and selling and general costs were $400,000 in 2015. Twisty Taffy sold 120,000 pallets in 2015 for $40 per pallet. Twisty Taffy’s 2015 variable costing operating income is ________.
- $840,000.
- $800,000.
- Selected: $440,000.This answer is incorrect.
- $200,000.
Reconsider your response. Review Module 7, Page I. Review the calculations and recompute your answer.
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Question 9
True or False: When ending inventory is greater than beginning inventory, variable costing operating income will be lower than absorption costing operating income.
- Selected:TrueThis answer is correct.
- False
Correct! When ending inventory increases relative to beginning inventory, more overhead will be capitalized on the balance sheet. As a result, absorption income will be higher.
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Question 10
The following chart depicts the relationship between Swiss Chocolate Manufacturing Company’s labor hours incurred and overhead costs incurred for the first half of the year.
| Month | Labor Hours | Overhead Costs | ||
| January | 2,240 | $ 9,954 | ||
| February | 2,600 | $10,250 | ||
| March | 1,520 | $6,850 | ||
| April | 2,700 | $11,640 | ||
| May | 3,080 | $11,125 | ||
| June | 2,625 | $11,500 | ||
Using the high-low method, the calculation for the cost formula for Swiss Chocolate Manufacturing Company’s overhead costs is ________.
- y = $6850 + $1.74 x
- Selected: y = $4164.80 + $2.74 xThis answer is correct.
- y = $6850 + $2.74 x
- y = $4164.80 + $1.74 x
Correct! Use the high and the low volumes to drive your calculation. The variable cost calculation is: change in y (total cost) / change in x (volume) = ($11,125 – $6,850)/(3,080 – 1,520) = $4,275/1,560 = $2.74 per unit. Then, plug the $2.74 into the equation to find the fixed cost, using the high or low point selected. Using the low: $6,850 = a + (1,520 x $2.74) = $6,850 = a + $4,164.80. Hence, a = $2,685.20.
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Question 1
True or False: A fixed cost for a leased manufacturing facility will be represented on a cost graph by a line that is parallel to the y-axis.
- True
- Selected:FalseThis answer is correct.
Correct! A fixed cost is represented by a line that is parallel to the x-axis.
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Question 2
Twisty Taffy Company manufactures bags of saltwater taffy shipped on pallets; the company was incorporated in 2015. The company actual and static budget volume was 200,000 pallets of product in its first year of operations. Variable manufacturing costs were $30 per pallet of product. Actual and static budget fixed manufacturing costs were $600,000, and selling and general costs were $400,000 in 2015. Twisty Taffy sold 120,000 pallets in 2015 for $40 per pallet. Twisty Taffy’s 2015 absorption costing operating income is ________.
- $840,000.
- $800,000.
- Selected: $440,000.This answer is correct.
- $200,000.
Correct! Note the calculation: The fixed overhead per pallet is $600,000/200,000 pallets = $3/pallet. Therefore, the gross margin per pallet is $40 – $30 – $3 = $7 per pallet. Multiply by units sold $7 X 120,000 pallets = $840,000 – $400,000 selling and general costs = $440,000.
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Question 3
Swiss Chocolate Manufacturing Company manufactures luxury handmade boxed truffles. The company notes the following information for overhead for daily production:
| Volume | Total cost |
| 800 units | $1,200 |
| 880 units | $1,300 |
| 960 units | $1,400 |
Utilizing the high-low method to determine the overhead cost formula for Swiss Chocolate Manufacturing Company, the correct calculation is ________.
- y = $100 + $1.50 x
- y = $100 + $1.48 x
- y = $100 + $1.38 x
- Selected: y = $100 + $1.25 xThis answer is correct.
Correct! Use the high and the low volumes to drive your calculation. The variable cost calculation is: change in y (total cost) / change in x (volume) = ($1400 – $1200)/(960 – 800) = $200/160 = $1.25 per unit. Then, plug the $1.25 into the equation to find the fixed cost, using the high or low point selected. Using the low: $1,200 = a + (880 X $1.25) = $1,200 = a + $1,100. Hence, a = $100.
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Question 4
Within the linear cost function y = a + bx, the ________,
- Selected: b term is the slope coefficient.This answer is correct.
- a term is the slope coefficient.
- x term is the slope coefficient.
- y term is the slope coefficient.
Correct! The b term is the slope coefficient.
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Question 5
True or False: A variable direct cost of sugar for a candy manufacturer will be represented on a cost graph by a line that runs from northwest to southeast, and has a negative slope.
- True
- Selected:FalseThis answer is correct.
Correct! A variable cost that increases in coordination the number of units produced is depicted by a line that runs from southwest to northeast, and has a positive slope.
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Question 6
Swiss Chocolate Manufacturing Company performs a regression analysis and notes a mixed cost function characterizes the behavior of utilities expenses. This indicates that ________.
- electricity contains both absorption and variable costs
- electricity costs are manageable
- Selected: electricity contains both fixed and variable costsThis answer is correct.
- electricity costs are not manageable
Correct! Mixed costs are characterized by both fixed and variable behavior.
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Question 7
Twisty Taffy Company’s management accountant generated the following analysis. The regression being for use in estimating overhead costs:
| Slope | 45 |
| Intercept | 5,700 |
| Correlation coefficient | .72 |
| Independent variable | Direct labor hours |
The cost formula for overhead cost based on this data is ________.
- y = $5,700 – $45x
- Selected: y = $5,700 + $45xThis answer is correct.
- y = $5,700 + ($45 – 0.72)
- y = $5,700 – 0.72
Correct! The formula takes the form y = a + bx.
y= 5,700 (intercept) + 45 (slope) x
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Question 8
The Swiss Chocolate Manufacturing Company manufactures chocolate truffles. A regression analysis of electricity cost reveals the following:
| Coefficients | Standard error | t Stat | P-value | ||
| Intercept | 1805.36 | 945.098 | 1.910233 | 0.088428663 | |
| Electricity cost | 3.63 | 0.339188 | 10.68839 | 0.00000205 | |
Is the intercept for Swiss Chocolate Manufacturing Company’s formula for electricity cost significant at the 95% confidence level?
- yes, because the p-value of approximately .09 is greater than .05, which is the reference amount
- Selected: no, because the p-value of approximately .09 is greater than .05, which is the reference amountThis answer is correct.
- yes, because the p-value of approximately .00 is less than .05, which is the reference amount
- no, because the p-value of approximately .00 is less than .05, which is the reference amount
Correct! The p-value for the intercept is approximately .09, and the reference amount is 100% – 95% or .05. Since the p-value is larger, the intercept is not significant in explaining the relationship for electricity cost.
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Question 9
True or False: The lower the r-squared value of a regression equation, the better the fit of the regression line to the data, as it is an indication that the variances are minimized.
- True
- Selected:FalseThis answer is correct.
Correct! The higher the r-squared value of a regression equation, the better the fit of the regression line is to the data.
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Question 10
True or False: When ending inventory is greater than beginning inventory, variable costing operating income will be lower than absorption costing operating income.
- Selected:TrueThis answer is correct.
- False
Correct! When ending inventory increases relative to beginning inventory, more overhead will be capitalized on the balance sheet. As a result, absorption income will be higher.