9)Ifthenumberofnewhiresi；A)$24,000；B)$10,667；C)$102,400；D)$40,000；Answer:C；Explanation:C)[8/(8+12+5；Diff:2；Terms:costestimation；Objective:3；AACSB:Analyticalskills；10)Whichcostestim

9) If the number of new hires is considered the cost driver, what amount of personnel costs will be allocated to Department A?

A) $24,000

B) $10,667

C) $102,400

D) $40,000

Answer: C

Explanation: C) [8 / (8 + 12 + 5)] × $320,000 = $102,400

Diff: 2

Terms: cost estimation

Objective: 3

AACSB: Analytical skills

10) Which cost estimation method is being used by Todd Company?

A) the industrial engineering method

B) the conference method

C) the account analysis method

D) the quantitative analysis method

Answer: B

Diff: 2

Terms: cost estimation

Objective: 3

AACSB: Analytical skills

Answer the following questions using the information below:

At the Christopher Company, the cost of the library and information center has always been charged to the various departments based upon number of employees. Recently, opinions gathered from the department managers indicate that the number of engineers within a department might be a better predictor of library and information center costs.

Total library and information center costs are $150,000.

Number of employees 125 500 125

The number of engineers 0 75 25

11) Which cost estimation method is being used by Christopher Company?

A) the quantitative analysis method

B) the industrial engineering method

C) the conference method

D) the account analysis method

Answer: C

Diff: 2

Terms: cost estimation

Objective: 3

AACSB: Communication

12) If the number of employees is considered the cost driver, what amount of library and information center costs will be allocated to Department A?

A) $100,000

B) $25,000

C) $0

D) $112,500

Answer: B

Explanation: B) [125/ (125 + 500 + 125)] × $150,000 = $25,000

Diff: 2

Terms: cost estimation

Objective: 3

AACSB: Analytical skills

13) If the number of engineers is considered the cost driver, what amount of library and information center costs will be allocated to Department A?

A) $100,000

B) $25,000

C) $0

D) $112,500

Answer: C

Explanation: C) [0 / (0 + 75 + 25)] × $150,000 = $0

Diff: 2

Terms: cost estimation

Objective: 3

AACSB: Analytical skills

Answer the following questions using the information below:

Jerry's TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations.

Sales (1,000 televisions) $ 900,000

Cost of goods sold 400,000

Store manager's salary per year 70,000

Operating costs per year 157,000

Advertising and promotion per year 15,000

Commissions (4% of sales) 36,000

14) What was the variable cost per unit sold for 2011?

A) $36

B) $436

C) $678

D) $400

Answer: B

Explanation: B) ($400,000 + $36,000) / 1,000 = $436 per unit

Diff: 2

Terms: cost estimation, slope coefficient

Objective: 3

AACSB: Analytical skills

15) What were total fixed costs for 2011?

A) $678,000

B) $436,000

C) $242,000

D) $227,000

Answer: C

Explanation: C) $70,000 + $157,000 + $15,000 = $242,000

Diff: 2

Terms: cost estimation, cost function

Objective: 3

AACSB: Analytical skills

16) What are the estimated total costs if Penny's expects to sell 3,000 units next year?

A) $1,550,000

B) $1,332,000

C) $1,671,000

D) $1,453,000

Answer: A

Explanation: A) $1,550,000 = $70,000 + $157,000 + $15,000 + [($400,000 + $36,000) / 1,000 ] × 3,000 Diff: 3

Terms: cost predictions

Objective: 3

AACSB: Analytical skills

17) Which cost estimation method is being used by Jerry's TV and Appliance Store?

A) the industrial engineering method

B) the conference method

C) the account analysis method

D) the quantitative analysis method

Answer: C

Diff: 2

Terms: cost estimation, account analysis method

Objective: 3

AACSB: Analytical skills

Answer the following questions using the information below:

Miller's Good Value Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2011 operations.

Sales (5,000 microwave ovens) $ 1,350,000

Cost of goods sold 540,000

Store manager's salary per year 75,000

Operating costs per year 225,000

Advertising and promotion per year 25,000

Commissions (4% of sales) 67,500

18) Which cost estimation method is being used by Miller's Good Value Appliance Store?

A) the account analysis method

B) the conference method

C) the quantitative analysis method

D) the industrial engineering method

Answer: A

Diff: 2

Terms: cost estimation, account analysis method

Objective: 3

AACSB: Analytical skills

19) What was the variable cost per unit sold for 2011?

A) $13.50

B) $108

C) $121.50

D) $186.50

Answer: C

Explanation: C) ($540,000 + $67,500) / 5,000 = $121.50 per unit

Diff: 2

Terms: cost estimation, slope coefficient

Objective: 3

AACSB: Analytical skills

20) What were total fixed costs for 2008?

A) $932,500

B) $325,000

C) $250,000

D) $225,000

Answer: B

Diff: 2

Terms: cost estimation, cost function

Objective: 3

AACSB: Analytical skills

21) What are the estimated total costs if Miller's expects to sell 6,500 units next year?

A) $932,500

B) $1,114,750

C) $1,017,500

D) $665,000

Answer: B

Explanation: B) $1,114,750 = $75,000 + $225,000 + 15,000 + [($540,000 + $67,500) / 5,000 ]× 6,500 Diff: 3

Terms: cost predictions

Objective: 3

AACSB: Analytical skills

22) The industrial engineering method of cost estimation is based on opinions from various departments and is quick and of low cost to apply.

Answer: FALSE

Explanation: The conference method of cost estimation is based on opinions from various departments and is quick and of low cost to apply.

Diff: 1

Terms: cost estimation, industrial engineering method

Objective: 3

AACSB: Communication

23) The account analysis method of cost estimation classifies account costs as fixed, mixed, or variable using qualitative judgments.

Answer: TRUE

Diff: 1

Terms: cost estimation, account analysis method

Objective: 3

AACSB: Reflective thinking

24) The account analysis method estimates cost functions by classifying various cost

accounts as variable, fixed, or mixed with respect to the identified level of activity.

Answer: TRUE

Diff: 1

Terms: account analysis method

Objective: 3

AACSB: Reflective thinking

25) The quantitative analysis method uses a formal mathematical method to identify cause-and-effect relationships among past data observations.

Answer: TRUE

Diff: 1

Terms: quantitative analysis method

Objective: 3

AACSB: Reflective thinking

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