Questions from Management Accounting

Q: The trend line developed using regression analysis provides a more accurate representation

The trend line developed using regression analysis provides a more accurate representation of a mixed cost function than the two-point or high-low methods. Explain why.

Q: ‘As volume increases, total cost increases and per-unit

‘As volume increases, total cost increases and per-unit cost decreases.’ What type of linear cost function does this describe? Draw a simple graph of this type of cost function.

Q: A motor vehicle assembly plant closes every August to retool for the

A motor vehicle assembly plant closes every August to retool for the next year’s model. How should August’s cost data be used in estimating the overhead cost function?

Q: You have been asked to provide the managing director with an approximate

You have been asked to provide the managing director with an approximate cost function for the entity’s activities, and it must be done by this afternoon. Some members of the board of directors want t...

Q: At two levels of activity within the relevant range, average costs

At two levels of activity within the relevant range, average costs are $192 and $188 respectively. Assuming the cost function is linear, what can be said about the existence of fixed and variable cost...

Q: You are about to start a coffee shop business. What do

You are about to start a coffee shop business. What do you understand by ‘cost behaviour’? Explain how your accountants could help you in building an understanding of cost behaviour. Identify the like...

Q: Explain how information from a scatter plot helps in categorising a cost

Explain how information from a scatter plot helps in categorising a cost as fixed, variable or mixed.

Q: Explain the analysis at the account level approach to developing a cost

Explain the analysis at the account level approach to developing a cost function.

Q: List two examples of non-linear cost functions and describe a

List two examples of non-linear cost functions and describe a method of developing a cost function for each one.

Q: Why might some have trouble classifying costs as fixed or variable?

Why might some have trouble classifying costs as fixed or variable?