Exam 10: Analysis of Cost Behaviour

Uncertainty about when customers will demand a product or service is generally credited as being the primary cause of bottlenecks.

Use the information below to answer the following question(s).The Monroe Company uses the high-low method to estimate the cost function.The information for the current year is provided below. -What is the constant for the estimating cost equation?

As part of his job as cost analyst, Max Thompson collected the following information concerning the operations of the Machining Department: Required: a.Use the high-low method to determine the estimating cost function with machine-hours as the cost driver. b.If June's estimated machine-hours total 4,200, what are the total estimated costs of the Machining Department?

Answer the following question(s)using the information below: The tool crib at a large manufacturing company is responsible for providing tools to the factory workers on demand.The tool crib has a variable demand.Historically, its demand has ranged from 150 to 250 small tools per day with an average of 200.Diane, the tool crib attendant, works eight hours a day, five days a week.Each order is for one small tool and each small tool takes Diane 2 minutes to retrieve from the bins. -What is the average waiting time, in minutes?

Cross-sectional data analysis includes

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 -Net cost of spoilage

EcoJet Inc.has variable demand for its check-in counter services.The daily demand ranges from 3,000 to 4,000 customers, and the average check-in takes 3 minutes.The average daily demand is 3,200 customers.The airline currently has 12 staffed stations operating 16 hours a day.Required: a.What is the average customer waiting time in minutes? b.In an effort to reduce costs, the airline is considering adding six automatic check-in stations.Management estimates that 25% of their customers will use the automatic check-in stations.They would like the average wait time to increase up to 12 minutes to encourage customer participation.How many staffed stations should be in operation to facilitate this wait time?

Which of the following describes the intercept in a linear cost function?

For a fast-food restaurant the average waiting time might be formulated as which of the following equations?

Sof-T, Inc.manufactures foam products for upholstery companies.It has two workstations, mixing/heating and cutting/assembly.The mixing/heating station is limited by the capacity of the equipment.Cutting/assembly is limited by the speed of the cutting machine workers.Cutting/assembly normally lags behind mixing/heating.Because the demand has increased in recent months, management is considering adding another person to cutting/assembly.This would increase the department's costs by $4,000 a month.If the person is moved from mixing/heating, that department's cost would decline by $3,000.By keeping mixing/heating labourers the same, the department can increase production on-call by 10 percent.Current idle time in mixing/heating averages one-half person a day for a net cost of $1,400 a month.Required: a.What is the net effect of moving the employee from mixing/heating to cutting/assembly? b.What is the net effect if a new employee is hired for cutting/assembly?

Simple regression analysis provides the means to evaluate a line of regression which is fitted to a plot of data and represents

The cost of the personnel department at the Miller Company has always been charged to the production departments based upon number of employees.Recently, opinions gathered from the department managers indicated that the number of new hires might also be a predictor of personnel costs to be assigned.Total personnel department costs are $120,000. Required: Using the above data, prepare a report that contrasts the different amounts of personnel department cost that would be allocated to each of the production departments if the cost driver used is: a.number of employees. b.the number of new hires. c.Which cost estimation method is being used by Miller Company?

Tri-State Manufacturing expects to spend $800,000 in 2019 in appraisal costs if it does not change its incoming materials inspection method.If it decides to implement a new receiving method, it will save $80,000 in fixed appraisal costs and variable costs of $0.40 per unit of finished product.The new method involves $120,000 in training costs and an additional $160,000 in annual equipment rental.It takes four units of material for each finished product.Internal failure costs average $160 per failed unit of finished goods.During 2019, 5% of all completed items had to be reworked.External failure costs average $400 per failed unit.The company's average external failures are 1% of units sold.The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used.Required: a.What is the net effect on appraisal costs for 2019, assuming the new receiving method is implemented and that 800,000 material units are received? b.How much will internal failure costs change, assuming 800,000 units of materials are received and that the new receiving method reduces the amount of UNACCEPTABLE product units in the manufacturing process by 10%?

The advantage of the high-low method when compared to regression analysis is that it considers multiple data points.

Answer the following question(s)using the information below: The tool crib at a large manufacturing company is responsible for providing tools to the factory workers on demand.The tool crib has a variable demand.Historically, its demand has ranged from 150 to 250 small tools per day with an average of 200.Diane, the tool crib attendant, works eight hours a day, five days a week.Each order is for one small tool and each small tool takes Diane 2 minutes to retrieve from the bins. -Diane has been asked to consider plans to add the retrieval of larger tooling fixtures to her duties.She anticipates that there would be an average of 12 tooling fixtures per day requested.Each tooling fixture would take Diane 4 minutes to retrieve.What is the average waiting time, in minutes, if Diane continues to be the only worker that would retrieve the small tools as well as the larger tooling fixtures?

A learning curve is a function that measures how labour-hours per unit decrease, as units of production increase.

List and describe the assumptions that must hold if simple regression procedures are to give reliable estimates of coefficient values.

The account analysis method estimates cost functions by classifying various cost accounts as variable, fixed, or mixed with respect to the identified level of activity.

Multicollinearity exists when which of the following conditions is present?

Review the following report of the results of a simple regression program for cost estimation. r² = 0.72 Required: a.What is the cost estimation equation according to the report? b.What is the goodness of fit? What does it tell about the estimating equation?