Costing - Study Mode
[#141] In linear cost function, which is y = a + bx, y is classified as
Correct Answer
(C) predicted cost
Explanation
Solution: In linear cost function, which is y = a + bx, y is classified as predicted cost. It is the estimation of future cost levels based on historical cost behaviour characteristics, using such statistical techniques as linear regression.
[#142] In specification analysis, assumptions related to linearity states but linearity must be within
Correct Answer
(B) relevant range
Explanation
Solution: In specification analysis, assumptions related to linearity states but linearity must be within relevant range.
[#143] In regression analysis, if predicted cost value is 65 and observed cost value is 19 then disturbance term will be
Correct Answer
(A) 46
Explanation
Solution: In regression analysis, if predicted cost value is 65 and observed cost value is 19 then disturbance term will be 46. Disturbance term cost = Predicted cost value - Observed cost value = 65 - 19 = 46.
[#144] In adjustment issues of costing, database must consider wide range values of
Correct Answer
(B) cost driver
Explanation
Solution: In adjustment issues of costing, database must consider wide range values of cost driver. A cost driver is the unit of an activity that causes the change in activity's cost.
[#145] Method, which considers cost and cost drivers of departments such as employee relations and process engineering is termed as
Correct Answer
(C) conference method
Explanation
Solution: Method, which considers cost and cost drivers of departments such as employee relations and process engineering is termed as conference method. The conference method is an approach to cost estimation that pools together data, analyses, and knowledge from expert sources in order to make decisions about costs.