Exam 10: Analysis of Cost Behaviour

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 -Analysis of the cause of defects in production

Which of the following statements about the cost estimation methods is FALSE?

The costs of quality at CanAm Construction Ltd.for the current year are as follows: Some information from a competitor, Canada Wide Construction (CWC), has been provided.CWC's costs of quality (as a percentage of total costs of quality)are 30% on external failure, 35% on internal failure, 20% on appraisal and the rest on prevention.Required: a.Prepare a cost of quality report for the year including calculations of each cost category as a percentage of total costs of quality. b.Compare CanAm's approach to quality management to CWC's.Comment on your findings.(What are the implications of the differences?)

The t -value of the b coefficient measures how large the value of the estimated coefficient is relative to its specification.

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 -Maintaining a complaint department

Use the information below to answer the following question(s).Raymaster is a small computer software company which uses the account analysis method and has hired you to perform some management advisory services.The company sold 2,500 high quality payroll programs last year. -What is the variable cost per unit sold?

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 -Retesting of reworked products

________ refers to the average amount of time that an order will be in line before it is set up and processed.

External failure costs include all of the following EXCEPT

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.

Costs of Quality (COQ)are classified into four categories: prevention costs, appraisal costs, inspection costs, and warranty costs.

To complete the first setup on a new machine took an employee 200 minutes.Using an 80% cumulative average-time learning curve indicates that the second setup on the new machine is expected to take

Use the information below to answer the following question(s).Dylan Products has a budget of $1,200,000 in 2018 for prevention costs.If it decides to automate a portion of its prevention activities, it will save $90,000 in variable costs.The new method will require $40,000 in training costs and $150,000 in annual equipment costs.Management is willing to adjust the budget for an amount up to the cost of the new equipment.The budgeted production level is 210,000 units.Appraisal costs for the year are budgeted at $500,000.The new prevention procedures will save appraisal costs of $50,000.Internal failure costs average $20 per failed unit of finished goods.The internal failure rate is expected to be 4% of all completed items.The proposed changes will cut the internal failure rate by one-half.Internal failure units are destroyed.External failure costs average $48 per failed unit.The company's average external failures average 2.5% of units sold.The new proposal will reduce this rate to 1%.Assume all units produced are sold and there are no ending inventories. -How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?

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 -Disposal of spoiled work in process

The Wildcat Company has provided the following information for the factory overhead cost pool: Required: Using the high-low method and the information provided above, a.identify the linear cost function equation and b.estimate the total cost at 36,000 units of output.

Warranty repair costs are

When estimating linear cost functions, it is assumed that variations in total cost of a cost object cannot be explained by variations in a single cost driver.

The standard error of the estimated coefficient indicates whether a relationship exists between the predictor variable and the outcome variable that cannot be attributed to chance alone.

The demand for Ballard's Glass Company's products varies, ranging from 10 to 20 windows a day with an average of 15.John Ballard is the only worker and he works a maximum of eight hours a day, five days a week.Each order is one window, and each window takes 26 minutes to install.The company plans to add doors to its product line and anticipates that they will sell an average of 5 doors per day.Each door takes 12 minutes to install.Ballard is concerned with the increased waiting time if it adds doors.To offset this concern it can hire a part-time employee.This will decrease windows time to 20 minutes and doors to 10 minutes.However, this will increase the costs of windows from $10 to $12 and doors from $6 to $7.50.Since he is giving customers faster service he will increase his prices from $17 to $20 for windows and from $10 to $12 for doors.What is the daily contribution margin if he sells both windows and doors and the part-time person is hired?

At the Christopher Company, the cost of the library and information centre has always been charged to the various departments based upon the number of employees.Recently, opinions gathered from the department managers indicated that the number of engineers might also be a predictor of personnel costs to be assigned.Total library and information costs are $150,000. Required: Using the above data, prepare a report that contrasts the different amounts of the library and information centre cost that would be allocated to each of the departments if the cost driver used is: a.number of employees. b.the number of engineers. c.Which cost estimation method is being used by Christopher Company?