Exam 2: Cost Behaviour

For each of the following situations,draw a graph that best describes the cost behaviour pattern.The vertical axis represents costs,and the horizontal axis represents volume. a.Direct materials per unit b.Depreciation expense on a building per unit c.An employee paid $50 per hour with a guaranteed salary of $1,000 per week d.A consultant paid $100 per hour with a maximum fee of $2,000 e. Salaries of teachers where each teacher can handle a maximum of 15 students

Under what circumstances might the high-low method give unsatisfactory results?

Ross Company has the following information available regarding costs at various levels of monthly production: Production volume Direct materials \ 70,000 \ 100,000 Direct labour 56,000 80,000 Indirect materials 21,000 30,000 Supervisors' salaries 12,000 12,000 Depreciation on plant and equipment 10,000 10,000 Maintenance 32,000 44,000 Utilities 15,000 21,000 Insurance on plant and equipment 1,600 1,600 Property taxes on plant and equipment Total a.Identify each cost as being variable,fixed,or mixed by writing the name of each cost under one of the following headings: Variable Costs Fixed Costs Mixed Costs b.Develop an equation for total monthly production costs. c.Predict total costs for a monthly production volume of 8,000 units.

Assume the following information: Volume Total Cos 80 units \ 1,200 88 units \ 1,300 96 units \ 1,400 What is the variable cost per unit?

What is the term for the learning curve that decreases by a constant percentage each time the cumulative quantity doubles?

Kane Corporation found its maintenance cost and sales dollars to be somewhat correlated.Last year's high and low observations were as follows: Maintenance Cost Sales \ 36,000 \ 400,000 \ 42,000 \ 600,000 What is the fixed portion of the maintenance cost?

Which of the following equations uses multiple regression?

Which of the following is NOT a method of determining cost behaviour?

The Knapp Company needs to predict the labour cost in producing small Carrot Patch Dolls.The following production information is available: Year Dolls Praduced Labour Hours Labour Dallars 2005 1,150 850 \ 17,000 2006 1,600 975 23,400 2007 1,100 800 25,600 2008 2,100 1,150 36,800 2009 1,500 950 34,200 2010 1,300 875 35,000 Wage rates have steadily increased since 2005; however,management expects no further increases in 2011. a.Select the appropriate independent variable for predicting labour cost.Explain the reason for your selection. b.Develop an equation to predict for 2011 the labour cost of producing Carrot Patch Dolls.Use the high-low method.

Which of the following is NOT an advantage of the method of least squares over the high-low method?

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 be the maintenance costs at 100 units of production?

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.What are the fixed costs?

What is a characteristic of the cost function derived by the least-squares cost estimation method?

Which activity driver explains changes in costs as the number of units produced changes?

Which statement best describes how fixed and variable costs behave per unit and in total?

The plant manager requested information to assist in estimating maintenance costs.The following computer printout was generated using the least-squares method: Intercept 2,550 Slope 1.85 Correlation coefficient 0.84 Activity variable Units of production volume a.Using the information from the computer printout,develop a cost function that can be used to estimate maintenance costs at different volume levels. b.Estimate maintenance costs if expected production for next month is 10,000 units.

What is acquired from outside sources,where the terms of acquisition do NOT require any long-term commitment for any given amount of the resource?

Parker Corp.has developed the following information on product costs and inventories for a three-month period: January February March Finished goods inventory, units: Beginning 15 20 25 Manufactured Available 45 65 65 Sold Ending Manufacturing costs $3,000 $5,000 $4,500 Based on managerial judgment,what is the best predictor of manufacturing costs?

Which cost behaviour method may use time and motion studies to determine the activities and amounts for cost behaviour analysis?

What is not a characteristic of flexible resources?