Exam 2: Cost Behaviour

What is the appropriate range for the coefficient of correlation (r)?

The following information is available for maintenance costs: Month Production Volume Maintenance Costs January 75 \ 250 February 115 310 March 190 400 April 60 240 May 135 355 -Refer to the figure.Using the method of least squares,what would the variable cost per unit of production be (rounded to two decimal places)?

Rush Company is trying to find an appropriate allocation base for factory overhead.Presented are five months of data: Month Direct Labour Hours Machine Hours Factory Overhead January 10 3 \ 45 February 20 5 75 March 15 4 70 Apri 30 5 130 May 25 3 80 r= $\frac { \Sigma ( X - X ) ( Y \cdot Y ) } { \left( \Sigma ( X - X ) ^ { 2 } \Sigma ( Y - Y ) ^ { 2 } \right) ^ {5 } }$ a.Calculate the correlation coefficient between factory overhead and direct labour hours. b.Calculate the correlation coefficient between factory overhead and machine hours. c.Should Rush Company use direct labour hours or machine hours for its allocation base for factory overhead? Why?

The following computer printout estimated overhead costs using linear regression: a.Write the multiple regression model. b.What does R Square mean? c.Provide a 95 percent confidence interval around the number of parts parameter.

The direct material cost is $10,000 when 2,000 units are produced.What is the direct material cost for 2,500 units produced?

What type of cost is incurred for the acquisition of short-run activity capacity,usually as the result of yearly planning?

What do mixed costs,by definition,contain?

In the method of least squares,what is the deviation?

In the formula Y = F + VX,what does Y refer to?

What is characteristic of the learning curve?

A managerial accountant has determined the following relationships between overhead and several possible bases: Basis Corralation with Total Overhead Direct labour hours 0.842 Direct labour dollars 0.279 Machine hours -0.837 Employee minutes in coffee breaks -0.243 What is the best basis for overhead application?

How are total costs computed?

In a traditional cost management system,what is the only type of driver that cost behaviour is assumed to be driven by?

What is the difference between a correlation equal to -1 and a correlation equal to +1?

As the volume of activity increases within the relevant range,how does the variable cost per unit respond?

Baker Enterprises developed a cost function for manufacturing overhead costs of Y = $8,000 + $1.60X.What are the estimated manufacturing overhead costs at 10,000 units of production?

What is a supervisor's salary of $2,000 per month an example of?

Boss Company currently leases a delivery van from Check Enterprises for a fee of $250 per month plus $0.40 per mile.Management is evaluating the desirability of switching to a modern,fuel-efficient van,which can be leased from David,Inc.,for a fee of $600 per month plus $0.05 per mile.All operating costs and fuel are included in the rental fees.Which delivery van would it be economically preferable to lease?

The Valley Forge Company cost accountant wants to determine the cost behaviour for overhead.Based on observation and discussion with the plant workers,the following accounts have been identified as the most relevant: supervisor salaries and depreciation are believed to be generally be fixed; indirect labour,utilities,and purchasing are generally believed to be variable; indirect labour primarily is responsible for moving materials; utility cost is primarily caused by the electricity to run machinery; and purchasing costs are driven by the number of purchase orders.These accounts and their balances are given below: Depreciation Indirect Supervisory on Plant and Labour Utilities Purchasing Salaries Equipment July \ 28,500 \ 24,000 \ 76,400 \ 40,000 \ 13,000 August 31,600 21,200 70,800 46,000 13,000 September 33,600 25,000 75,200 64,000 13,000 October 41,400 25,000 80,400 55,600 13,000 November 40,000 25,000 79,800 50,800 13,000 December 34,000 25,000 79,400 34,000 13,000 Total \ 209,100 \ 145,200 \ 462,000 \ 290,400 \ 78,000 Information on the activities is given below: \# af Moves Machine Hours Purchase Orders July 340 5,400 250 August 380 5,200 300 September 400 5,800 450 Octaber 500 6,200 380 November 480 6,000 340 December 420 5,600 200 Total 2,520 34,200 1,920 i.Why did the cost accountant decide that salaries and depreciation were fixed? ii.Calculate the average account balance for each of the five accounts and calculate the average monthly amount for each of the three drivers. iii.Calculate the fixed overhead and variable rates for each of the costs.Write an equation for the total overhead cost. iv.In January,490 moves; 4,375 machine hours,and 220 purchase orders were expected.What is the amount of overhead predicted?

The following information is available for electricity costs for the last six months of the year: Month Production Volume Electricity Costs July 1,400 \ 2,200 August 2,800 5,400 September 3,200 5,700 October 1,750 3,900 November 1,200 2,400 December 2,100 4.050 -Refer to the figure.Using the high-low method,what is the estimated variable cost per unit of production?