COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
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Chapter 10, Problem 10.48P
Purchasing department cost drivers, multiple regression analysis (continuation of 10-47). Carl Hart decides that the simple regression analysis used in Problem 10-47 could be extended to a multiple regression analysis. He finds the following results for two multiple regression analyses:
Regression 4: PDC = a + (b1 × No. of POs) + (b2 × No. of Ss)
Regression 5: PDC = a + (b1 × No. of POs) + (b2 × No. of Ss) + (b3 × MP$)
The coefficients of correlation between combinations of pairs of the variables are as follows:
- 1. Evaluate regression 4 using the criteria of economic plausibility, goodness of fit, significance of independent variables, and specification analysis. Compare regression 4 with regressions 2 and 3 in Problem 10-47. Which one of these models would you recommend that Hart use? Why?
Required
- 2. Compare regression 5 with regression 4. Which one of these models would you recommend that Hart use? Why?
- 3. Hart estimates the following data for the Baltimore store for next year: dollar value of merchandise purchased, 578,500,000; number of purchase orders, 4,100; number of suppliers, 110. How much should Hart budget for purchasing department costs for the Baltimore store for next year?
- 4. What difficulties do not arise in simple regression analysis that may arise in multiple regression analysis? Is there evidence of such difficulties in either of the multiple regressions presented in this problem? Explain.
- 5. Give two examples of decisions in which the regression results reported here (and in Problem 10-47) could be informative.
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Directions: Choose the right answer in the multiple-choice
1. What is the cost incurred in the past?
A. Future cost
B. Unknown cost
C. Already incurred cost
D. Accounting Cost
E. None of the above
2. The formula: Y=a+bx+cz is an example ofA. Simple regressionB. Multiple regressionC. Linear programmingD. None of the above
3. If “r” between two variables is zero, how might the scatter diagram of these variables appear?A. A least-square line that slopes to the rightB. A least-square line that slopes to the leftC. Under this case, the scatter diagram could not be plotted in the graphD. None of the above
4. In cost accounting, relevant range is the range over which A. Production is stableB. Costs are stable and constantC. Total fixed cost fluctuatesD. Cost relationship Is not validE. None of the above
5. Which of the following is a controller’s responsibility?
A. Provision for capitalB. Custodian of fundsC. Credit and collectionD. Arranging shirt…
Carter Dry Cleaning has developed two regression analyses for cost estimation. The accounting manager has presented statistical measures for both of these regressions. Regression A has an R-squaredvalue of .53 and a t-value of 1.08. Regression B has an R-squared of .89 and a t-value of 2.17. Whatdo these statistical measures indicate about the regressions? Which regression should Carter DryCleaning use for cost estimation?
Which of the following methods of cost estimation relies on only two data points?A. the high-low methodB. account analysisC. least-squares regressionD. SWOT analysis.
Chapter 10 Solutions
COST ACCOUNTING
Ch. 10 - What two assumptions are frequently made when...Ch. 10 - Describe three alternative linear cost functions.Ch. 10 - What is the difference between a linear and a...Ch. 10 - High correlation between two variables means that...Ch. 10 - Name four approaches to estimating a cost...Ch. 10 - Describe the conference method for estimating a...Ch. 10 - Describe the account analysis method for...Ch. 10 - List the six steps in estimating a cost function...Ch. 10 - When using the high-low method, should you base...Ch. 10 - Describe three criteria for evaluating cost...
Ch. 10 - Define learning curve. Outline two models that can...Ch. 10 - Discuss four frequently encountered problems when...Ch. 10 - Prob. 10.13QCh. 10 - All the independent variables in a cost function...Ch. 10 - Multicollinearity exists when the dependent...Ch. 10 - HL Co. uses the high-low method to derive a total...Ch. 10 - A firm uses simple linear regression to forecast...Ch. 10 - In regression analysis, the coefficient of...Ch. 10 - A regression equation is set up, where the...Ch. 10 - What would be the approximate value of the...Ch. 10 - Estimating a cost function. The controller of the...Ch. 10 - Identifying variable-, fixed-, and mixed-cost...Ch. 10 - Various cost-behavior patterns. (CPA, adapted)....Ch. 10 - Matching graphs with descriptions of cost and...Ch. 10 - Account analysis, high-low. Stein Corporation...Ch. 10 - Account analysis method. Gower, Inc., a...Ch. 10 - Prob. 10.27ECh. 10 - Estimating a cost function, high-low method. Lacy...Ch. 10 - Linear cost approximation. Dr. Young, of Young and...Ch. 10 - Cost-volume-profit and regression analysis....Ch. 10 - Regression analysis, service company. (CMA,...Ch. 10 - High-low, regression. May Blackwell is the new...Ch. 10 - Learning curve, cumulative average-time learning...Ch. 10 - Learning curve, incremental unit-time learning...Ch. 10 - High-low method. Wayne Mueller financial analyst...Ch. 10 - High-low method and regression analysis. Market...Ch. 10 - High-low method; regression analysis. (CIMA,...Ch. 10 - Regression, activity-based costing, choosing cost...Ch. 10 - Interpreting regression results. Spirit...Ch. 10 - Cost estimation, cumulative average-time learning...Ch. 10 - Cost estimation, incremental unit-time learning...Ch. 10 - Regression; choosing among models. Apollo Hospital...Ch. 10 - Multiple regression (continuation of 10-42). After...Ch. 10 - Cost estimation. Hankuk Electronics started...Ch. 10 - Prob. 10.45PCh. 10 - Interpreting regression results, matching time...Ch. 10 - Purchasing department cost drivers, activity-based...Ch. 10 - Purchasing department cost drivers, multiple...
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- Which of the following methods of cost estimation relies on only two data points? A. the high-low method B. account analysis C. least-squares regression D. SWOT analysis.arrow_forwardA manager uses regression to express sales as a function of advertising expenditures (X1), and per capita income (X2) in your sales area. The following multiple linear regression equation is developed: Y = 10 + 0.51X1 + 0.45X2 The coefficient of determination is 0.96 Determine which of the following conclusions is valid regarding the coefficient of determination: Multiple Choice The coefficient of determination should always be greater than one. More analysis is needed. The coefficient of determination leaves much unexplained. The coefficient of determination is positive because the constant term is positive. The regression line fits the data used in the sample very well. There is a strong indication of the relationship of the two variables with sales.arrow_forward7. Which of the following charts best represent total variable costs? For each chart, the line represents the cost behavior pattern, the vertical axis represents costs, and the horizontal axis represents total volume, (A) Your answer is (B) (C) (D) Explain your answer: 8. Which of the following is NOT a cost estimation method? A) High-low cost estimation B) Scatter diagrams C) Least-square regressions D) CVP analysis Your answer is Explain your answer: 9. Assume a local Cost Cutters provides cuts, perms, and hairstyling services. Annual fixed costs are $120,000, and variable costs are 40 percent of sales revenue. Determine its break-even point in sales dollars. A) $250,000 B) $200,000 c) $240,000 D) $360,000 Your answer is Explain your answer:arrow_forward
- Using the data in E4-2 and spreadsheet software, determine: The variable cost per unit, the total fixed cost, and R2. The plotted data points using the graphing function. Compare the results to your solutions in E4-2 and E4-3 and explain the reasons for the results.arrow_forwardWhich of the following statements related to cost estimation methods is true ? a . Only high -low method has a slope and an intercept . b. The scatter - graph method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels . c. The most complex method of cost estimation is the high - low method . d. The least -squares regression method is the most accurate and reliable method to determine the cost behavior compared to scatter -graph plot and high -low methods . e. None of the given answersarrow_forward6.) Statement 1. The high-low method needs three observations of costs to calculate the cost formula.Statement 2. The least-squares regression method uses all of the available data to find the best fitting line.Statement 3. The calculations in the least-squares regression method is always accurate in all data sets between any kind of activity and cost. Which of the following is true?Group of answer choices Statement 1 Statement 3Statements 1 and 3Statements 1 and 2 Statements 2 and 3 Statement 2 7.) Which of the following statements is true about broker markets?Group of answer choices Brokers’ extensive contacts provide them with a pool of price information that individual investors could easily duplicate themselves, and hence not really value adding. Investors have an incentive to hire a broker because what they charge as a commission is less than the cost of direct search. Brokers can guarantee an order because they have an inventory of securities. Brokers bring buyers and sellers…arrow_forward
- Simple regression analysis provides the means to evaluate a line of regression, which is fitted to a plot of data and represents the a. way costs change with respect to dependent variable.b. way costs change with respect to both independent and dependent variables.c. variability expense with pesos of productiond. way costs change with respect to independent variable.arrow_forwardObtain and study a CVP graph and answer the next multiple choice 22. Select the correct statement concerning the cost-volume-profit graph at right: a. The point identified by "B" is the break-even point. b. Line F is the variable cost line. c. At point B, profits equal total costs. d. Line E is the total cost line. Line F Line E Line Darrow_forwardApplying the DDM model utilizing the following inputs: PO, d1, d2, r, g. When rearranging the price expression so that we can solve for g, g= r - d2/((PO*(1+r)-d1)) True Falsearrow_forward
- The independent variable in regression analysis is: Multiple Choice Usually expressed as a range of values. The cost to be estimated. Hard to define because of its independence. The cost driver used to estimate the value of the dependent variable. Always a volume-based cost driver.arrow_forward12) Which of the following techniques is not used to analyze cost behavior? A) Least-squares regression. B) Visual-fit method. O High-low method. D) Multiple regression. E) Linear programming.arrow_forwardGive me a formula of sensitivity analysis under of cost volume profit analysis(CVP). Thank youuu:)arrow_forward
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