Question

5. A controller in a company wants to estimate the cost behaviour of customer service costs. Which of the following is an application of managerial judgement in determining cost behaviour? A. The accountant performs a scattergraph analysis and deletes several data points determined to be outliers. B. The accountant decides to use the last three years' data, but excluding the period when there, was a workers' labour strike which resulted in reduced productivity C. The accountant runs a regression using direct labour hours as the independent variable, However, she/he adjusts the x coefficient variable upwards by 5 percent to reflect anticipated labour cost increases for the coming year. D. The account decides to try multiple regression since the coefficient of determination on a simple regression equation is 0.49. E. All of the above.

Answer 1

It looks the option E is most appropriate since all of the above methods are useful for the accountant to determine the cost behavior

1. Scatter graph are useful to determine the future cost by separating the fixed,variable and semi variable expenses

2. Previous data excepting the abnormal year is also acceptable for the future cost calculation

3 and 4 . Regression analysis considering the mentioned values are also acceptable