EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
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Chapter 22, Problem 13BE
To determine
Concept Introduction:
Regression analysis is a statistical method used to determine the cost equation and fixed, variable cost elements by application of information from all data points, not just the highest and lowest ones. Many software packages are available to perform regression analysis. Intercept and slope functions of Excel are one such tool that can be used to determine costs.
The computation of variable and fixed cost elements using regression analysis.
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Which of the following statements is true? Select one: O a. The most complex of the cost estimation methods is the high-low method. O b. Engineering approach approximates cost function by classifying each account as either variable or fixed based on the analyst's knowledge of how the account behaves. C The high-low method of deriving an estimated cost line uses all the data points available. O d. In approximating the cost function, the account analysis classifies costs based upon an industrial engineer's evaluation of production methods, and material, labor, and overhead requirements. O e. The high-low 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.
In determining cost behavior in business, the cost function is often expressed as Y=a+bX. Which one of the following cost estimation methods uses only two levels of activities in estimating fixed and variable costs for the predictive equation?
Group of answer choices
Multiple Regression
Graphic Method
High-low Method
Simple Regression
Which of the following statements related to CVP chart is not true?
O a.
To determine the variable cost per unit from a graph, the change in cost is divided by the change in units.
O b. The scatter graph method is a way to estimate the cost behavior by graphically connecting the two cost amounts
identified with the highest and lowest volume levels.
O c.
The slope of the total cost line determines the variable cost per unit.
O d. To calculate the total fixed cost from a graph is by multiplying a level of volume by the variable cost per unit found out
earlier and subtracting that from the total cost for that level of volume.
e.
The intercept between the total cost line on a graph and the y-axis determines the fixed cost.
f. None of the given answers.
Chapter 22 Solutions
EBK ACCOUNTING PRINCIPLES
Ch. 22 - Prob. 1QCh. 22 - Prob. 2QCh. 22 - Prob. 3QCh. 22 - Prob. 4QCh. 22 - Prob. 5QCh. 22 - Prob. 6QCh. 22 - Prob. 7QCh. 22 - Prob. 8QCh. 22 - 9. “Cost-volume-profit (CVP) analysis is based...Ch. 22 - Prob. 10Q
Ch. 22 - Prob. 11QCh. 22 - Prob. 12QCh. 22 - Prob. 13QCh. 22 - Prob. 14QCh. 22 - Prob. 15QCh. 22 - Prob. 16QCh. 22 - Prob. 17QCh. 22 - Prob. 20QCh. 22 - Prob. 1BECh. 22 - Prob. 2BECh. 22 - Prob. 3BECh. 22 - Prob. 4BECh. 22 - Prob. 5BECh. 22 - Prob. 6BECh. 22 - Prob. 7BECh. 22 - Prob. 8BECh. 22 - Prob. 9BECh. 22 - Prob. 10BECh. 22 - Prob. 11BECh. 22 - Prob. 12BECh. 22 - Prob. 13BECh. 22 - Prob. 1DIECh. 22 - Prob. 2DIECh. 22 - DO IT! 22-3 Cedar Grove Industries produces and...Ch. 22 - Prob. 4DIECh. 22 - Prob. 5DIECh. 22 - Prob. 1ECh. 22 - E22-2 The controller of Norton Industries has...Ch. 22 - Prob. 4ECh. 22 - Prob. 5ECh. 22 - Prob. 6ECh. 22 - Prob. 7ECh. 22 - Prob. 12ECh. 22 - Prob. 13ECh. 22 - Prob. 14ECh. 22 - Prob. 15ECh. 22 - Prob. 16ECh. 22 - Prob. 17ECh. 22 - Prob. 1PSACh. 22 - Prob. 2PSACh. 22 - Prob. 3PSACh. 22 - Prob. 4PSACh. 22 - Prob. 5PSACh. 22 - Prob. 6PSACh. 22 - Prob. 7PSACh. 22 - BYP22-1 Creative Ideas Company has decided to...Ch. 22 - Prob. 5EYCT
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- _____Identifying the relationship between the activity and the costs is a key step in which of the following cost estimation methods? a) Scattergraph. b) High-low method. c) Linear regression. d) Account analysis.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_forwardWhich of the following are assumptions associated with the cost equation? Check all that apply. The cost equation is used to estimate costs at a variety of volume levels Cost estimates are valid within a discrete range of volumes Per unit variable costs represent the slope of a cost equation Cost equations are lineararrow_forward
- 6.) 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_forwardDistinguish between ( a ) a variable cost, ( b ) a mixed cost, and ( c ) a step-variable cost. Plot thethree costs on a graph, with activity plotted horizontally and cost plotted verticallyarrow_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_forward
- When using the visual-fit method to estimate a cost function, we can estimate the fixed cost by O the point where the sketched line (through all or most of the data points) intersects the y-axis O calculating the variable cost per unit of the cost driver O the point where the sketched line (through all or most of the data points) intersects the x-axis O subtracting the variable cost at any cost driver level from the total costarrow_forwardWhich of the following statements related to cost estimation methods is true? O a. The most complex method of cost estimation is the high-low method. O b. The high-low method is the most accurate and reliable method to determine the cost behavior compared to scatter-graph plot and least-squares regression methods. O c. The low-high 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. O d. Only high-low method has a slope and an intercept. O . None of the given answers.arrow_forwardAn easy way to estimate the variable and fixed costs components of a mixed cost is by: 1. a scatter plot 2. the high-low method 3. a regression analysis 4. a guesstimatearrow_forward
- Fixed cost per unit ______ A. Can be estimated by the high - low method. B. Remains the same when the level of activity changes. C. Are represented by the slope of the total cost line. D. All of the above answers are correct.arrow_forwardWhich of the following statements related to CVP chart is not true? O a. None of the given answers. O b. To calculate the total fixed cost from a graph is by multiplying a level of volume by the variable cost per unit found out earlier and subtracting that from the total cost for that level of volume. Oc. The high-low method is a way to estimate the cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels. O d. To determine the variable cost per unit froma graph, the change in cost is divided by the change in units. O e. The slope of the total cost line determines the fixed cost per unit. Of. The intercept between the total cost line on a graph and the y axis determines the fixed cost. on Mazoon Company sells 500 units resulting in $300,000 of sales revenue, $100,000 of variable costs, and $36,000 of fixed costs. The number of units that must be sold to achieve $40,000 of operating income is: Fir F2 F3 F9 F10 F1 F4 F5 F6 F7 F8 23…arrow_forwardSearch about how different techniques are efficient to estimate cost. – Engineered estimate of cost– Analysis at the account level– Regression analysisarrow_forward
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