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### 11 when using the high low method the two observations used are the high and low obs 4300592

11) When using the high-low method, the two observations used are the high and low observations of the:

A) cost driver

B) dependent variables

C) slope coefficient

D) residual term

12) When using the high-low method, the denominator of the equation that determines the slope is the:

A) dependent variable

B) independent variable

C) difference between the high and low observations of the cost driver

D) difference between the high and low observations of the dependent variables

13) The high-low method:

A) easily handles estimating the relationship between the dependent variable and two or more independent variables

B) is more accurate than the regression method

C) calculates the slope coefficient using only two observed values within the relevant range

D) uses the residual term to measure goodness of fit

14) Put the following steps in order for using the high-low method of estimating a cost function:

A = Identify the cost function

B = Calculate the constant

C = Calculate the slope coefficient

D = Identify the highest and lowest observed values

A) D C A B

B) C D A B

C) A D C B

D) D C B A

15) Regression analysis:

A) is simple to compute

B) measures the change in a dependent variable associated with one or more independent variables

C) is mathematical so it does not require an understanding of operations

D) uses the constant to measure goodness of fit

16) Simple regression differs from multiple regression in that:

A) multiple regression uses all available data to estimate the cost function, whereas simple regression only uses simple data

B) simple regression is limited to the use of only the dependent variables and multiple regression can use both dependent and independent variables

C) simple regression uses only one independent variable and multiple regression uses more than one independent variable

D) simple regression uses only one dependent variable and multiple regression uses more than one dependent variable

17) The slope of the line of regression is the:

A) rate at which the dependent variable varies

B) rate at which the independent variable varies

C) level of total fixed costs

D) level of total variable costs

Answer the following questions using the information below:

The Delmonico Company uses the high-low method to estimate the cost function. The information for 2011 is provided below:

Machine-hoursLabor Costs

Highest observation of cost driver400\$20,000

Lowest observation of cost driver240\$ 13,600

18) What is the slope coefficient per machine-hour?

A) \$56.66

B) \$0.10

C) \$40.00

D) \$50.00

19) What is the constant for the estimating cost equation?

A) \$4,000

B) \$13,600

C) \$16,000

D) \$20,000

A) EITHER: Constant = \$20,000 – (\$40.00 × 400 hours) = \$4,000

OR: Constant = \$13,600 – (\$40.00 × 240 hours) = \$4,000

20) What is the estimate of the total cost when 300 machine-hours are used?

A) \$4,000

B) \$8,000

C) \$12,000

D) \$16,000