Exam 10: Analysis of Cost Behaviour

Bank of Bowmanville has variable demand for its counter services. The daily demand ranges from 200 to 250 customers a day and the average banking transaction takes 6 minutes. The average daily demand is 228 customers. The bank currently has 5 staff members serving the counter and operates 7 hours a day. Required: a. What is the average customer waiting time in minutes? b. In an effort to reduce costs, the bank is considering eliminating one of its counter services staff and having a manager fill in during two hours of the day. What would be the effect of this change on wait time? What might the customers' reaction be?

Use the information below to answer the following question(s). Presented below is the production data for the last six months of the year for the mixed costs incurred by Wagner Company. -Using the high-low method, the cost function would be stated as

Harry's Picture manufactures various picture frames. Each new employee takes 5 hours to make the first picture frame and 4 hours to make the second. The manufacturing overhead charge per hour is $20. Required: a. What is the learning-curve percentage, assuming the cumulative average method? b. What is the time needed to build 8 picture frames by a new employee using the cumulative average-time method? Assume the rate of learning factor is -0.1520. c. What is the time needed to produce the 16th frame by a new employee using the incremental unit-time method? Assume the rate of learning factor is -0.3219.

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Quality circles

Arfaei Company manufactures chairs. Because the efforts of manufacturing are approximately equal between labour and machinery, management is considering other possible cost drivers. By considering different cost drivers, it is anticipated that the estimating process can be improved. The following cost estimating equations with their r² values have been determined for 2016: Required: a. Which equation should be selected for the analysis? b. What other factors should be included in the selection of the estimating equation?

Stow-a-way Luggage Ltd. manufactures luggage for the traveler concerned about excessive airline luggage fees. They have two designs of carry-on luggage. The "Exec" is targeted to business travelers and the "Companion" for those on a holiday. The company used simple regression to budget indirect costs of $823,400 based on the following equation: y = $542,400 + $5.62X, where X is 50,000 direct labour hours for a budgeted production of 250,000 units. At the end of the year the company's controller evaluated the actual costs for producing 220,000 units. Using simple regression that actual indirect cost of $810,825; represented by the following equation y = $535,400 + $5.75X for the 47,900 actual direct labour hours. Required: a. Determine the rate, efficiency/production-volume variances for the indirect costs. b. What statistical measure of serial correlation could the controller use to determine if the independence of the residuals is within an acceptable range?

Match the description with the appropriate term. -A criteria used to prevent the indiscriminate inclusion of independent variables that have an acceptable correlation.

Nidek manufactures sport swear. Classify each of the following quality costs as prevention, appraisal, internal failure or external failure. -Quality training

The Bhaskara Corporation used regression analysis to predict the annual cost of indirect materials. The results were as follows: What is the linear cost function?

Brad Henry has just purchased the film studio of a movie company that specializes in action adventures. He found that the company did not try to estimate the cost of making a movie. Instead it just gave the producer a budget and told him/her to make a movie within budget. Mr. Henry does not like the former movie-budget concept and desires to establish a formal cost estimation system. Required: What are some of the potential problems that may be encountered in changing from a budget to a cost estimation movie-making system?

Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver. a. Direct manufacturing labour is $20 per hour. b. Direct materials cost $8.00 per cubic metre. c. Utilities have a minimum charge of $2,000 plus a charge of $0.05 per kilowatt hour. d. Factory supplies average $10 per day plus $1.00 for each machine-hour per day. e. Total manufacturing amortization includes $5,000 for straight-line plant amortization plus machinery amortization of $100 for each day operated.

Use the information below to answer the following question(s). The Barnett Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Barnett Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation. ‪ -What is the cost function derived from using the high-low method?

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Reentering data because of keypunch errors

Birch Canvas and Tarp manufactures canvas products in a highly automated assembly plant in Edmonton, Alberta. Their automated system is in its first year of operation, and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations the following data were collected: Required: a. Compute a cost estimating equation for each independent variable (machine-hours and kilowatt-hours) using the high-low method. b. For July the company ran the machines for 1,600 hours and used 2,075,000 kilowatt hours of power. The overhead costs totalled $95,000. Which driver was the best predictor for July?

Simple regression differs from multiple regression in that

Use the information below to answer the following question(s). The Skip Corporation has assembled the following data pertaining to certain costs which cannot be easily identified as either fixed or variable. Skip Corporation has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation. -The total cost at an operating level of 2,850 hours would be

Use the information below to answer the following question(s). Presented below is the production data for the last six months of the year for the mixed costs incurred by Wagner Company. -The total cost at an operating level of 10,000 units would be

Compute the estimated costs for each of the following equations assuming the following costs for July: In addition, state whether each is for a variable, fixed, or mixed cost. a. Total estimated costs = intercept b. Total estimated costs = constant c. Total estimated costs = constant + (slope × cost driver) d. Total estimated costs = slope coefficient × cost driver In addition, state whether each is for a variable, fixed, or mixed cost.

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. -Audits of the effectiveness of the quality system

A cost analyst collected the following information for the Machining Department: Observation Machine-hours Total Operating Costs Required: a. Determine the estimating cost function with machine-hours as the cost driver using the high-low method. b. If December's estimated machine-hours total 8,400, what is the estimated cost of the Machining Department?