Exam 3: Cost Behavior

The average unit cost at a monthly volume of 9,000 units is $3, and the average unit cost at a monthly volume of 22,500 units is $2.10. Required: Develop an equation for total monthly costs.

The method of managerial judgement in determining the cost behavior uses:

Stanfil Corporation developed a cost function for manufacturing overhead costs of Y = $8,000 + $1.60X. Estimated manufacturing overhead costs at 10,000 units of production are

The Johnson Company is trying to find an appropriate allocation base for factory overhead. Presented are five months of data: Month Direct Labor Hours Machine Hours Factory Overhead June 10 3 \ 45 July 20 5 75 August 15 4 70 September 30 5 130 October 25 3 80 $r = \frac { \sum ( X - X ) ( Y - Y ) } { \left( \sum ( X - X ) ^ { 2 } \sum ( Y - Y ) ^ { 2 } \right) ^ { 5 } }$ Required: a.Calculate the correlation coefficient between factory overhead and direct labor hours. b.Calculate the correlation coefficient between factory overhead and machine hours. c.Should Johnson Company use direct labor hours or machine hours for their allocation base for factory overhead? Why?

The Ladder Company wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data: Month Cost of Electricity Direct Labor Hours February \ 8,100 750 May 9,000 850 August 10,200 1,000 November 8,700 800 Using the high-low method, which of the following is the best equation?

Multiple regression is a dependable tool for identifying the behavior of activity costs.

Rent of $10,000 paid per month for renting a building is an example of a(n):

Longberry Corporation manufactures and sells party items. The following representative direct labor hours and production costs are provided for a four-month period: Month Direct Labor Hours Production Costs May 3,600 \ 15,000 June 4,800 17,500 July 6,000 20,000 August 4,800 17,500 Total 19,200 \ 70,000 Let A = Fixed production costs per month B = Variable production costs per direct labor hour N = Number of months X = Direct labor hours per month Y = Total monthly production costs S = Summation Predict a cost for 5,000 labor hours.

A correlation coefficient near -1 means that two variables are moving in the _________ direction.

Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units. If 300,000 machine hours had been worked last year, what would be the total machine maintenance cost?

When the volume of activity increases within the relevant range, the fixed cost per unit

Violet Company has five process engineers, and each of them can process 2,500 design changes. Last year 5,000 design changes were processed by the five engineers. Each engineer is paid $50,000 per year. Calculate the unused capacity.

The high-low method preselects the two points that are used to compute the parameters F and X in the expression Y = F + VX

Managers agree that the ideas behind the learning curve can extend to the service industry only.

A _________ function displays a constant level of cost for a range of output and then jumps to a higher level.

Amigos Industries analyzed the relationship between total factory overhead and changes in direct labor hours. It found the following: Y = $6,000 + $6X The Y in the equation is an estimate of

The most widely used method to determine cost behavior is managerial judgement.

Which of the following is an example of a committed fixed expense?

What does a correlation coefficient near +1 mean?

The plot of data points showing the relationship between materials handling costs and activity output is called a scattergraph.