Exam 10: Analysis of Cost Behaviour

Nidek manufactures sport swear.Classify each of the following quality costs as prevention, appraisal, internal failure or external failure. A)Internal failure B)Prevention C)Appraisal D)External failure -Downtime due to quality problems

There is poor goodness of fit if the predicted values do not match actual cost observation.

Nidek manufactures sport swear.Classify each of the following quality costs as prevention, appraisal, internal failure or external failure. A)Internal failure B)Prevention C)Appraisal D)External failure -Quality training

Carl Clarkson and Lenny Lenid have been assigned to review the costs of quality at the Sprotton Chemicals Ltd.for the month of September.All amounts are in thousands (000's). Some information from a competitor, Sheltonville Industries, has been leaked.You learn that Sheltonville's costs of quality (as a percentage of total costs of quality)are 15% on external failure, 20% on internal failure, 35% on appraisal and the rest on prevention.Required: a.Prepare a cost of quality report for September for the Sprotton Chemicals including calculations of each cost category as a percentage of total costs of quality. b.Compare Sprotton's approach to quality management to Sheltonville's.Comment on your findings.(What are the implications of the differences?)

Manufacturing lead time includes

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 2019: Required: a.Which equation should be selected for the analysis? b.What other factors should be included in the selection of the estimating equation?

A paper company manufactures cardboard boxes.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 r, values have been determined for 2018: Required: a.Which equation should be selected for the analysis? b.What are other factors that should be included in the selection of the estimating equation?

The collection of information on costs and their drivers, gathered through observations and interviews, from departments within an organization is known as the

Craig's Cola was to manufacture 1,000 cases of cola next week.The accountant provided the following analysis of total manufacturing costs. r² = 0.82 What is the estimated cost of producing the 1,000 cases of cola?

The Door Company manufactures doors.Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. A)Appraisal B)Internal failure C)Prevention D)External failure -Data collection problems arise when

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?

Schotte Manufacturing Company uses two different independent variables (machine-hours and number of packages)in two different equations to evaluate costs of the packaging department.The most recent results of the two regressions are as follows: Machine-hours: Number of packages: There were twenty degrees of freedom.The critical value at the 95% level is 1.729.Required: a.What are the estimating equations for each cost driver? b.Which cost driver is best and why?

Which of the following statements related to assumptions about estimating linear cost functions is TRUE?

A step cost function is an example of a linear function.

The selection of the best measure of benefit will depend upon the corresponding change in the cost pool.

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

Discuss the potential use of nonlinear curves in cost functions and cost analysis.Give some examples.

An "economy of scale" function is an example of a linear cost function.

Statistical significance of independent variables is determined by comparing the t-value to a threshold called degrees of freedom.

The Door Company manufactures doors.Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. A)Appraisal B)Internal failure C)Prevention D)External failure -Technical support provided to suppliers