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Midterm

ADM 3346 Study Guide - Midterm Guide: Regression Analysis, Academic Integrity, Finished Good


Department
Administration
Course Code
ADM 3346
Professor
Tiemei L I
Study Guide
Midterm

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ADM 3346 X
Mid Term Examination
Cost Accounting
Spring/Summer 2012
Solutions
2 hours
Student Name: _________________________________
Student #: _____________________________________
Section: (Prof. Robert Collier)
Instructions:
1. This examination comprises 5 questions over 15 pages. The exam booklet is not to be
removed from the examination room. You may separate the pages but ensure that you put
them back together stapled before handing your exam in.
2. Limit your answer to the space provided. A blank sheet for rough work and supporting
calculations is given at the end of the exam on the last page (page 14).
3. This exam is out of 65 marks and is 2 hours long. You should budget approximately 1.8
minutes per mark.
4. Please do not ask the invigilator or the professor any questions, as they will not be
answered. State reasonable assumptions, if you feel they are necessary.
5. Language dictionaries (non-electronic) are allowed if the invigilator permits them.
6. You must sign the Statement of Academic integrity on page 2 of this exam.
Marks
Question No. 1 Cost Estimation
/14
Question No. 2 Job Costing
/14
Question No. 3 CVP Analysis
/12
Question No. 4 Process Costing
/18
Question No. 5 ABC
/7
Total
/65

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2
Statement of Academic Integrity
The Telfer School of Management does not condone academic fraud, an act by a student
that may result in a false academic evaluation of that student or of another student. Without
limiting the generality of this definition, academic fraud occurs when a student commits any
of the following offences: plagiarism or cheating of any kind, use of books, notes,
mathematical tables, dictionaries or other study aid unless an explicit written note to the
contrary appears on the exam, to have in his/her possession cameras, radios (radios with
head sets), tape recorders, pagers, cell phones, or any other communication device which
has not been previously authorized in writing.
Statement to be signed by the student:
I have read the text on academic integrity and I pledge not to have committed or attempted
to commit academic fraud in this examination.
Signed:______________________________________
Note: an examination copy or booklet without that signed statement will not be graded and
will receive a final exam grade of zero.

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3
Question No. 1 (14 marks)
Armer Company is accumulating data to use in preparing its annual profit plan for the coming
year. The cost behavior pattern of the maintenance costs must be determined. The accounting
staff has suggested the use of linear regression to derive an equation for maintenance hours and
costs. Data regarding the maintenance hours and costs for the last year and the results of
regression analysis follow:
Month Hours of Activity Maintenance Costs
January 480 $4,200
February 320 3,000
March 400 3,600
April 300 2,820
May 500 4,350
June 310 2,960
July 320 3,030
August 520 4,470
September 490 4,260
October 470 4,050
November 350 3,300
December 340 3,160
Sum (Σ) 4,800 43,200
Average (μ) 400 3,600
Regression Statistics
Adjusted R-Square 0.99724
Standard Error of the Estimate 34.469
Observations 12
a (intercept) 684.65
b coefficient 7.2884
t-value for β60.105
Required:
(a) If Armer Company uses the high-low method of cost estimation, write the
equation for the relationship between hours of activity and maintenance costs.
(4 marks)
(b) Using the data from the regression statistics, calculate budgeted maintenance costs
assuming activity in a given month is 420 hours. (2 marks)
(c) What is the total variance (in percentage terms) that can be explained by the
regression equation? (2 marks)
(d) Assume the ρ-value for the slope in the regression analysis has a value of 0.01.
Explain the meaning of this ρ-value. (2 marks)
(e) Armer Company is considering adding additional cost drivers and performing
multiple regression analysis. Name four (4) assumptions inherent in the use of
multiple regression analysis. (4 marks)
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