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

The correct answer is option E

Explanation:- Managerial judgement is a widely used practice to determine cost behavior and makes use of experience and past observations of cost relationships to identify fixed and variable costs. Managerial judgement makes use of a combination of qualitative and quantitative analysis to estimate the costs involved in making crucial decisions.