Exam 2: Cost Behavior, Activity Analysis, and Cost Estimation

The following data was obtained from the books of the Delta Home Painting Company: Compute the fixed and variable components of the monthly overhead costs using the high-low method.

Kratz Manufacturing Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates: During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit. -What is the total manufacturing cost for the period?

The scatter diagram method of cost estimation:

Classify each of the following costs as variable, fixed, mixed, or step by writing an X under one of the following headings (Sales volume is the cost driver).

The total monthly operating costs of Kristy's Yogurt Ice Cream Shack are: $3,500 + $0.90X, where X = 12 ounce serving a. Calculate the average cost per serving at each of the following monthly volumes: 1,000, 2,000, 3,000 and 5,000, and b. Determine the monthly volume at which the average cost per serving is $1.90

The following procedure performed by a dairy is the best example of a unit level activity within a manufacturing cost hierarchy:

George Rentals offers machine rental services for concrete cutting. Consider the following costs of the company over the relevant range of 4,000 to 10,000 hours of operating time for its concrete cutting equipment. -What are the estimated total fixed costs at a volume of 10,000 hours?

The graph of an estimated cost represented by cost equation, Y = a + bX, would be best described by which of the following descriptions:

Number of machine hours is most appropriate as a cost driver for which of the following types of activity costs?

The coefficient of determination for estimating packaging costs for a local shipper was determined to be 0.84. Which of the following statement is not correct?

In the following equation for total cost, Y = a + bX, the slope of the total cost line is an approximation of which of the following?

The Illinois Tools Machine Shop wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data: What would be the best equation using the high-low method?

The range of operations that falls within the capacity of the current level of fixed costs is referred to as the:

The Perry Products Company needs to predict the labor cost in producing made-to-order mugs. The following production information is available: a. Select the appropriate independent variable for estimating labor cost. Explain the reason for your selection. b. Develop an equation for labor costs using the high-low method of cost estimation, and predict total costs for an annual usage of 2,500 labor hours.

Over the past century cost structures in the typical company have shifted significantly as a consequence of breakthroughs in technology, resulting in a major downward shift in direct labor as a percentage of total manufacturing costs.

Step costs:

An increase in volume within the relevant range will cause:

The cost of issuing and tracking a work order would best be classified as what type of activity?

The introduction of production technology to replace labor in a manufacturing process would likely result in which of the following?

Briefly explain why changes in technology and prices make cost estimation difficult.