# Cost Accounting I Ashford ACC310 Week 2 Quiz

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### Regression analysis does not assume a

constant variance for the independent error terms (e) from the predicting equation.

### The Shapely Company uses the high-low method to determine its cost equation. The following information was gathered for 2008: Machine Hours Direct Labor Costs Busiest month (June) 14,000 \$200,000 Slowest month (December) 6,000 \$120,000 If Shapely expects to use 10,000 machine hours next month, what are the estimated direct labor costs?

ANS: \$160,000

200,000 - 120,000 = \$80,000
14,000 - 6,000 = 8,000
\$80,000 / 8,000 = \$10 per hour
\$10 X 6,000 = \$60,000 AND \$120,000 - \$60,000 = \$60,000 in FC

\$10 X 10,000 hours = \$100,000 + \$60,000 = \$160,000

Account Analysis

### 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:

ANS: \$4,000

Price is \$16
Cost is \$14 + \$1 for shipping & other
\$16 - \$15 = \$1 X 4,000 units = \$4,000

Only B is false.

### In a labor intensive company in which more overhead is used by the more highly skilled and paid employees, which activity base would be most appropriate for applying overhead to production?

Direct labor cost

### The loan department of a financial corporation makes loans to businesses. The costs of processing these loans are often several thousand dollars. All loans are initially evaluated using the same financial analysis software, but some require outside services such as appraisals and legal services. Which is the most appropriate costing system for the loan department?

operation costing

only A.

### Which of the following statements is (are) false regarding cost allocations and product costing? (A) It is easier to determine the individual product cost for a manufacturer than it is for a wholesaler. (B) In general, indirect costs are assigned, while direct costs are allocated.

Both A and B are false.

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