Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is provided below:

Machine-hoursLabor Costs

Highest observation of cost driver550$22,000

Lowest observation of cost driver250$ 13,000

3.1) What is the estimated cost function for the above data?

A) y = 13,000 + 43.75X

B) y = 5,500 + 30X

C) y = 22,000 + 40X

D) y = 16,500 + 52X

3.2)The smaller the residual term in the regression analysis, the:

A) stronger the relationship between the cost driver and costs

B) weaker the relationship between the cost driver and costs

C) steeper the slope of the cost function

D) gentler the slope of the cost function

Each time Mayberry Nursery hires a new employee, it must wait for some period of time before the employee can meet production standards. Management is unsure of the learning curve in its operations but it knows the first job by a new employee averages 40 hours and the second job averages 32 hours. Assume all jobs to be equal in size.

3.3)What is the learning-curve percentage, assuming the cumulative average-time method?

A) 0.9

B) 0.85

C) 0.8

D) 0.75

Mertens Company provides the following ABC costing information:

ActivitiesTotal CostsActivity-cost drivers

Account inquiry hours$200,00010,000 hours

Account billing lines$140,0004,000,000 lines

Account verification accounts $75,00040,000 accounts

Correspondence letters$ 25,0004,000 letters

Total costs$440,000

The above activities are used by Departments A and B as follows:

Department ADepartment B

Account inquiry hours2,000hours4,000 hours

Account billing lines400,000lines200,000 lines

Account verification accounts 10,000accounts 8,000accounts

Correspondence letters1,000letters1,600 letters

3.4) How much of the account inquiry cost will be assigned to Department A?

A) $40,000

B) $200,000

C) $80,000

D) None of these answers are correct.