Costing - Study Mode

[#421] In regression analysis, if observed cost value is 62 and predicted cost value is 29, then disturbance term would be
Correct Answer

(A) 33

Explanation

Solution: Disturbance term = Observed cost value รท Predicted cost value = 62 - 29 = 33

[#422] An amount by which total cost changes with respect to change in level of activity is classified as
Correct Answer

(D) slope coefficient

Explanation

Solution: An amount by which total cost changes with respect to change in level of activity is classified as slope coefficient. The slope coefficient usually refers to the coefficient of any independent variable, x, in a regression equation.

[#423] An assumption of specification analysis states: any observation does not belong to any other observation's residual value, is classified as
Correct Answer

(A) independence of residuals

Explanation

Solution: An assumption of specification analysis states: any observation does not belong to any other observation's residual value, is classified as independence of residuals. These residual plots can be used to assess the quality of the regression.

[#424] Most frequently used methods of quantitative analysis include
Correct Answer

(B) high low method

Explanation

Solution: Most frequently used methods of quantitative analysis include high low method. The high low method and regression analysis are the two main cost estimation methods used to estimate the amounts of fixed and variable costs.

[#425] If residual error is 25 and predicted cost value is 50, then observed cost value would be
Correct Answer

(D) 75

Explanation

Solution: Observed cost value = Predicted cost value + Residual error = 50 + 25 = 75