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Regression analysis does not assume

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1.(A) The primary decision for special orders is determining whether the differential revenue is greater than1. Which of the following statements regarding special orders is (are) true?
the differential costs associated with the order.
(B) The differential analysis approach to pricing for special orders could lead to underpricing in the
long-run because fixed costs are not included in the analysis.
only A.
only B.
neither A nor B is false.
both A and B are true.

2. A manager is trying to estimate the manufacturing costs of a new product. The company makes several
other products that utilize some of the same manufacturing procedures as the new product. Which cost
estimation method would be the best method to determine the total cost of manufacturing the new product?
engineering estimates
regression analysis
account analysis
scattergraph
high-low

3. Regression analysis does not assume a (Points : 1)
linear relationship between the dependent and independent variables(s).
normal distribution of the actual values (y) around the predicting equation (y').
constant variance for the independent error terms (e) from the predicting equation.
logical and causal relationship between the dependent and independent variable(s).

4. Which of the following costs would most likely be classified as variable assuming the account analysis
method is used to determine cost behaviors?
indirect materials.
supervisory salaries
equipment maintenance
annual Christmas party
building occupancy costs.

5. Which of the following would be the least appropriate allocation base for allocating overhead in a
highly automated (i.e., capital-intensive) manufacturing company?
electricity used
machine hours
direct labor hours
material consumed

6. The MNK Company has gathered the following information for a unit of its most popular product:
Direct materials
$6
Direct labor
3
Overhead (40% variable)
5
Cost to manufacture
14
Desired markup (50%)
7
Target selling price
21

The above cost information is based on 4,000 units. A foreign distributor has offered to buy 1,000
units at a price of $16 per unit. This special order would not disturb regular sales. Variable shipping
and other selling expenses would be $1 per unit for the special order. If the special order is accepted,
MNK's operating profits will increase by: (Points : 1)
$1,000.
$1,600.
$2,000.
$4,000.
$5,000.

7. The CJP Company produces 10,000 units of item S10 annually at a total cost of $190,000

Direct materials
$ 20,000
Direct labor
55,000
Variable overhead
45,000
Fixed overhead
70,000
Total
$190,000

The XYZ Company has offered to supply 10,000 units of S10 per year for $18 per unit. If CJP accepts
the offer, $4 per unit of the fixed overhead would be saved. In addition, some of CJP's facilities could be
rented to a third party for $15,000 per year. What are the relevant costs for the "make" alternative?
(Points : 1)
$160,000
$165,000
$175,000
$185,000

8. The Cost Flow Diagram includes all of the following costs except: (Points : 1)
Selling expenses
Direct materials
Direct labor
Fixed manufacturing overhead
Variable manufacturing overhead

9. Techniques, Inc. uses a predetermined manufacturing overhead rate based on direct labor hours to
apply its indirect product costs to jobs. The following information has been collected for the previous year:

Direct materials
$150,000
Direct labor
200,000
Sales commissions
100,000
Indirect labor
50,000
Rent on office equipment
25,000
Depreciation – factory building
75,000
Utilities – factory
125,000

Techniques used 25,000 direct labor hours and 50,000 machine hours during the previous year. What is
the predetermined overhead rate per direct labor hour? (Points : 1)
$24.00
$15.00
$14.00
$10.00

10. Which of the following costs are irrelevant for a special order that will allow an organization to utilize
some of its present idle capacity? (Points : 1)
Direct materials
Indirect materials
Variable overhead
Unavoidable fixed overhead
Differential sales commission

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