Exam 3: Cost Behavior and Estimation

Delivery costs for Fast Delivery appears below for two months of operation. How should the delivery costs be classified?

The following information is available for Crescent Computer Company for its monthly maintenance costs: Using the high-low method: a. Estimate the variable cost component of the maintenance cost for Crescent. b. Estimate the fixed cost component of the maintenance cost for Crescent. c. Determine the estimated cost function for Crescent Computer's maintenance cost. d. If Crescent expects to produce 230 units in September, what are the expected total maintenance costs to be incurred?

Makito Manufacturers incurs the following costs in manufacturing computers. Match the cost driver with the related cost which would most likely cause the cost to change. -Indirect production labor wages

Identify and describe on what four assumptions the nature of the regression method relies.

Makito Manufacturers incurs the following costs in manufacturing computers. Match the cost driver with the related cost which would most likely cause the cost to change. -Computer chips, Memory boards, Keyboard assemblies

Alpine Corporation has been manufacturing the same model of snowboards for several years. The original time to produce one snowboard was 2 hours (120 minutes). Over the last year, the production line has steam-lined the production process with a learning curve of 80%. Recently, the company has introduced a new model of snowboard which now requires 3 hours of production time, but with a 90% learning curve. How much time will it take to produce the third unit of the new snowboard?

You have been provided with the following data regarding shipments and costs for Brighton Boutiques: Required: Plot the data points on a scatter graph, and then using the high-low method, determine the cost function of the line that will connect the high and low points on the graph. Does the cost function appear to be linear in nature?

Greta's Gadgets has a learning curve of 90%. The time observed to complete the first gadget was 1 hour (60 minutes). What is the expected time to complete the 5^th unit assuming the learning curve of 90%?

Describe the regression method and explain why it is a better method for estimating future costs.

Ventner Manufacturing manufactures a single product. Monthly costs incurred in the production process of 1,000 units are shown below. Compute the expected costs to be incurred when production is 3,000 units using your understanding of cost classifications to determine which of the costs are fixed or variable.

Cyril's Cycling Enthusiasts sells specialty bikes. Cyril has just hired a new assistant to assemble the bikes purchased by customers. Since Cyril is new to bike assembly, he was shocked to find that it took his new assistant 5 hours to assemble his first bike. Cyril has done some research on the internet and found that a learning curve of 90% is normal for bike assembly. Cyril would therefore, like to predict what the average time would be for his assistant to assemble 32 bikes, considering he is expecting a large customer order and wants to give the customer an accurate timeframe for the completion of the assembly.

Wally World provided the following data concerning its costs of operating and the number of riders of its Scream ride and the related linear regression for selected operation months: Using the high-low method, what is the amount of total fixed costs for the Scream ride?

Septa Bus Company accumulates the following data concerning a mixed cost, using miles as the activity level. Required: a. Using the high-low method, determine the cost function for total costs using miles driven as a cost driver, separating the cost into its respective variable cost component and fixed cost component. b. Prepare a scatter plot for total costs using miles driven as a cost driver using the graph template below. c. Septa expects that it buses will be driven 12,000 miles in September due to a new route being added. What are the predicted total costs for September?

In evaluating the economic plausibility of a regression model, the analyst is determining

What is the common goal of the high-low method and the regression method?

You have recently decided to open a miniature golf course on a tract of land that you inherited. You have estimated that your monthly fixed costs will be $150 and your variable cost per customer will be $4. Prepare a graph showing your fixed cost line, total variable costs, and total cost line for 10 customers.

Makito Manufacturers incurs the following costs in manufacturing computers. Match the cost driver with the related cost which would most likely cause the cost to change. -Power Costs

A line with a positive slope indicates that the

A manager of an insurance agency was working on the portion of a time budget for one of his new insurance agent hires. He knows that based on past experience with new hires, that there is a learning curve, but that due to the complexity of the work assignments, that the new hire will not be able to significantly reduce time spent on any of the new tasks, as he will still be learning. If the manager wishes then to use a very small learning curve for the work of the new hire, should the learning curve be set at 95% or 5%? Explain answer.

You and another company are currently bidding on a construction project. Your competitor is an experienced construction company with an observed learning curve of 90%. You are a new company with no observed learning curve. Assuming the company with the lowest bid will be granted the contract and both companies determined their bid based on a 40% markup on cost, who will most likely get the construction contract?