1. A learning curve measures the effect of learning on efficiency. TRUE
2. Regression analysis relies on two observations to estimate a linear cost function. FALSE
3. An example of a step variable-cost function is the cost of material-handling labor when inputs
are acquired in discrete quantities. TRUE
4. A positive slope of a regression line indicates that total costs are lower for higher values of the
cost driver. FALSE
5. The quantitative analysis method uses a formal mathematical method to identify cause-and-
effect relationships among past data observations. TRUE
6. In estimating a cost function using quantitative analysis, the independent variable is the factor
used to predict the dependent variable. TRUE
7. In regression analysis, the term "goodness of fit" indicates the strength of the relationship
between the cost driver and the costs. TRUE
8. A cost function is a mathematical description of how a cost changes with changes in the level of
an activity relating to that cost. TRUE
9. A strength of the high-low method of cost estimation is that the high point and the low point are
representative of all data points. FALSE
10. y = a + bX represents the general form of the linear cost function. TRUE
11. One assumption frequently made in cost behavior estimation is that changes in total costs can
be explained by changes in the level of a single activity. TRUE
12. The first step in estimating a cost function using quantitative analysis is to identify the
independent variable. FALSE
13. Step fixed-cost functions are variable over the long run. TRUE
14. The smaller the vertical difference between actual costs and predicted costs the better the
goodness of fit. TRUE
15. The high-low method is more accurate than the regression method of estimating a cost
function. FALSE
16. The industrial engineering method of cost estimation is based on opinions from various
departments and is quick and of low cost to apply. FALSE
17. The y-intercept of a linear cost function is an accurate cost assessment of using zero machine-
hours, even if zero machine-hours is outside of the relevant range. FALSE
18. The cumulative average-time learning model with a 90% learning curve indicates that if it takes
100 minutes to manufacture the first unit of a new model, then the second unit will take only 90
minutes to manufacture. FALSE
19. Regression analysis relies on two observations to estimate a linear cost function. FALSE
20. The incremental unit-time learning model with a 90% learning curve indicates that if it takes 100
minutes to manufacture the first unit of a new model, then the second unit will take only 90
minutes to manufacture. TRUE
21. The most common forms of quantitative analysis are the conference method and the account
analysis method. FALSE
22. The high-low method involves choosing the period of highest cost driver activity and the period
of lowest cost driver activity. TRUE
23. All cost functions are linear. FALSE
