MA lecture 2 + workshop 1 Flashcards
tenta (14 cards)
What are the two methods to fit cost functions to past data observations?
High-low method and regression analysis.
What is the independent variable (IV) in the context of cost functions?
cost driver
What is the dependent variable (DV) when analyzing cost functions?
Cost object
How does the high-low method determine the cost curve in a scatter plot?
By drawing a line between the highest and lowest observations.
What is a major drawback of the high-low method?
It is very sensitive to outliers, which can distort the cost function.
What does the linear regression analysis method aim to minimize?
The squared deviations (squared residuals) of observations from the regression line.
What is the purpose of the ordinary least squares (OLS) method in regression analysis?
To choose a line and slope that minimizes the squared deviations between observations and the regression line.
What does an R^2 value of 0.84 indicate in regression analysis?
84% of the changes in the dependent variable can be explained by changes in the independent variable.
In a scatter plot, how is the cost function represented using regression analysis?
By drawing a line that estimates the cost function based on the data points.
What happens if an accounting error places the lowest variable observation incorrectly in the high-low method?
It would significantly alter the cost function, leading to overestimated fixed costs and underestimated variable costs.
What is the visual representation of the cost function in the high-low method?
A line connecting the highest and lowest data points on a scatter plot.
What is the main goal of regression analysis in cost accounting?
To provide a more accurate representation of the cost function by minimizing deviations.
What is the relationship between the independent and dependent variables in cost analysis?
Changes in the cost driver (number of units produced) affect production costs.
What is the significance of the slope in the cost function derived from regression analysis?
It indicates the rate of change in production costs with respect to changes in the number of units produced.
