Learning Objective 8-3
1) Which of the following is
not
a representation of a cause-and-effect relationship?
A) A physical relationship between the level of activity and costs.
B) Units of production are used as the activity that affects direct material costs.
C) A contractual agreement.
D) Knowledge of operations.
E) A contract that fails to specify the number of parts used as the activity measure of ordering costs.
2) In which step of the decision process are managers fairly confident about the direct material and direct manufacturing labor costs associated with a product or service?
A) Step 1: Identify the Problem and Uncertainties.
B) Step 2: Obtain Information.
C) Step 3: Make Predictions about the Future.
D) Step 4: Make Decisions by Choosing among the Alternatives.
E) Step 5: Implement the Decision, Evaluate Performance, and Learn.
3) In which step of the decision process do managers compare predicted costs to determine the accuracy of predictions?
A) Step 1: Identify the Problem and Uncertainties.
B) Step 2: Obtain Information.
C) Step 3: Make Predictions about the Future.
D) Step 4: Make Decisions by Choosing among the Alternatives.
E) Step 5: Implement the Decision, Evaluate Performance, and Learn.
4) In which step of the decision process do managers use past data to estimate the relationship of cost drivers compared to costs?
A) Step 1: Identify the Problem and Uncertainties.
B) Step 2: Obtain Information.
C) Step 3: Make Predictions about the Future.
D) Step 4: Make Decisions by Choosing among the Alternatives.
E) Step 5: Implement the Decision, Evaluate Performance, and Learn.
5) In which step of the decision process would managers use the regression analysis estimate of indirect manufacturing costs of alternative products, and choose to introduce the most profitable styles?
A) Step 1: Identify the Problem and Uncertainties.
B) Step 2: Obtain Information.
C) Step 3: Make Predictions about the Future.
D) Step 4: Make Decisions by Choosing among the Alternatives.
E) Step 5: Implement the Decision, Evaluate Performance, and Learn.
6) In which step of the decision process does a manager gather potential information about the cost driver?
A) Step 1: Identify the Problem and Uncertainties.
B) Step 2: Obtain Information.
C) Step 3: Make Predictions about the Future.
D) Step 4: Make Decisions by Choosing among the Alternatives.
E) Step 5: Implement the Decision, Evaluate Performance, and Learn.
7) Managers use cost estimation to measure a relationship based on data from past costs.
8) Better cost predictions do
not
help managers make informed planning and control decisions, such as preparing next year's customer-service budget.
9) Only a cause-and-effect relationship,
not
merely correlation, establishes an economically plausible relationship between the level of an activity and its costs.
10) Managers must be careful
not
to interpret a high correlation, or connection, in the relationship between two variables to mean that either variable causes the other.
11) Why do managers identify cost drivers on a long-time horizon?