Exam 2: Cost Behaviour

Machine hours and electricity costs for Wells Industries for the year 2011 are as follows: January 2,000 \ 9,200 February 2,320 10,500 March 1,520 6,750 April 2,480 11,500 May 3,040 14,125 June 2,640 11,000 July 3,280 12,375 August 2,800 11,375 September 1,600 7,750 October 2,960 13,000 November 3,760 15,500 December 3,360 13,875 a.Using the high-low method,develop an estimate of variable electricity costs per machine hour. b.Using the high-low method,develop an estimate of fixed electricity costs per month. c.Using the high-low method,develop a cost function for monthly electricity costs. d.Estimate electricity costs for a month in which 3,000 machine hours are worked.

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

Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis,which of the following costs would be represented by a line that is parallel to the horizontal axis?

Adams Corporation rents a truck for a flat fee plus an additional charge per mile.What type of cost is the rent?

-Refer to the figure.Which graph represents fixed costs?

What are salaries paid to shift supervisors an example of?

Lee Corporation manufactures and sells party items. The following representative direct labour hours and production costs are provided for a four-month period: Month Direct Labour Hours Production January 3,600 \ 15,000 February 4,800 17,500 March 6,000 20,000 April 4,800 17,500 Total 19.200 \ 70.000 Let $\quad$ a = Fixed production costs per month $\quad$ $\quad$ b = Variable production costs per direct labour hour $\quad$ $\quad$ n = Number of months $\quad$ $\quad$ X = Direct labour hours per month $\quad$ $\quad$ Y = Total monthly production costs $\quad$ $\quad$ s = Summation -Refer to the figure.What would the cost be for 5,000 labour hours?

When is the linearity assumption most likely to be a close approximation for an underlying nonlinear cost function?

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

The following computer printout estimated overhead costs using multiple regression: During the year the company used 1,000 setup hours and 500 parts. -Refer to the figure.What are the degrees of freedom for the model?

Abboud Company is planning to introduce a new product with an 80 percent incremental unit-time learning curve for production for batches of 1,000 units.The variable labour costs are $30 per unit for the first 1,000-unit batch.Each batch requires 100 hours.There is $10,000 in fixed costs not subject to learning.What is the cumulative total time (labour hours)to produce 2,000 units?

Innova,Inc.,is beginning the production of a new product.Management believes that 500 labour hours will be required to complete the new unit.A 90 percent cumulative average-time learning curve model for direct labour hours is assumed to be valid.Data on costs are as follows: Direct materials \ 50,000 per unit Direct labour \ 20 per direct labour hour Variable manufacturing overhead \ 30 per direct labour hour a.Set up a table with columns for cumulative number of units,cumulative average time per unit in hours,and cumulative total time in hours using the cumulative average-time learning curve.Complete the table for 1,2,4,and 8 units. b.Set up a similar table assuming an 80 percent cumulative average-time learning curve. c.What is the difference in variable cost of producing four units?

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. Develop an equation for total monthly costs.

If all the activity capacity acquired is not used,what is this an example of?

What type of expense results when organizations acquire many multi-period service capacities by paying cash up front or by entering into an explicit contract that requires periodic cash payments?

The following computer printout estimated overhead costs using regression: Degrees Degrees of of Freedom 90\% 95\% 99\% Freedom 90\% 95\% 99\% 1 6.314 12.708 63.657 11 1.796 2.201 3.106 2 2.920 4.303 9.925 12 1.782 2.179 3.055 3 2.353 3.182 5.841 13 1.771 2.160 3.055 4 2.132 2.776 4.604 14 1.761 2.145 3.012 5 2.015 2.571 4.032 15 1.753 2.131 2.947 6 1.943 2.447 3.707 16 1.746 2.120 2.921 7 1.895 2.365 3.499 17 1.740 2.110 2.898 8 1.860 2.306 3.355 18 1.734 2.101 2.878 9 1.833 2.262 3.250 19 1.729 2.093 2.861 10 1.812 2.228 3.169 20 1.725 2.086 2.845 During the last accounting period 10,000 DLH were worked. -Refer to the figure.What do the hypothesis tests of the cost parameters indicate?

English Corporation analyzed the relationship between total factory overhead and changes in direct labour hours.It found the following: Y = $6,000 + $6X What is the Y in the equation an estimate of?

What is an equipment lease that specifies a payment of $5,000 per month plus $8 per machine hour used an example of?

Greene Enterprises has the following information about its truck fleet miles and operating costs: Year Miles Operating Costs 2010 400,000 \ 256,000 2011 480,000 280,000 2012 560,000 320,000 What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2008 is 500,000 miles?

Which of the following is NOT a weakness of the high-low method?