Chapter 10 MC questions Flashcards
(39 cards)
Here are 30 multiple-choice questions based on your learning objectives and notes:
- 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
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
Here are 30 multiple-choice questions based on your learning objectives and notes:
- 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
- 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
- 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
C
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
B
- 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.
C
- 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
B
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.
C
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.
B
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
B
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
Which method uses all data points for estimating a cost function?
A) High-low method
B) Regression analysis
C) Visual inspection
D) Simple averaging
B
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.
B
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
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.
B
Which of the following is NOT a type of quality cost?
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) Marketing costs
D
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.
B
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
B
What is a cause-and-effect diagram also known as?
A) Fishbone diagram
B) Scatter plot
C) Control chart
D) Regression mode
A
Which of the following is an example of a fixed cost?
A) Raw materials
B) Sales commissions
C) Rent
D) Wages for hourly workers
C
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
B
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
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
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
C
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
