Exam 10: Analysis of Cost Behaviour

The slope of the line of regression is

A nonlinear cost function

The incremental unit-time learning model with a 90% learning curve indicates that if it takes 100 minutes to manufacture the first unit of a new model, then the second unit will take only 90 minutes to manufacture.

An example of a nonfinancial measure for customer satisfaction is

Costs incurred in detecting which of the individual units do not conform to specifications are called

An example of a nonfinancial balanced scorecard measure concerning internal business processes would be the percentage of products that fail soon after delivery.

All of the following are approaches to cost estimation EXCEPT

A cause-and-effect relationship, relative to cost drivers and resulting costs, may develop because of physical relationships, contractual relationships, or implicit relationships.

Answer the following question(s)using the information below.Jenny's Pottery Store is a small retail company that has the following information pertaining to current year operations. -What were total fixed costs at Jenny's Pottery Store for the current year?

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 -Quality circles

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 -Warranty repairs

Pam's Stables used two different independent variables (trainer hours and number of horses)in two different equations to evaluate the cost of training horses.The most recent results of the two regressions are as follows: Trainer's hours: r² = 0.56 Number of horses: r² = 0.63 What is the estimated total cost for the coming year if 16,000 trainer hours are incurred and the stable has 400 horses to be trained, based on the best cost driver?

Manufacturing lead times can affect costs but do not affect sales revenue.

Joe's Copy Centre hires a new employee.Joe knows he has to be patient with the employee until the employee gains enough experience to meet production standards.Joe is unsure of the learning curve in his operation, but he knows the first job by a new employee averages 40 minutes and the second job averages 32 minutes.Assume all jobs to be equal in size.Required: a.What is the learning-curve percentage, assuming the cumulative average-time method? b.What is the time for a new employee to do 32 jobs with this learning curve using the cumulative average-time method? You may use an index of -0.1520.

Use the information below to answer the following question(s).At the high point of the relevant range, labour hours at Bradco Restoration were 10,000 and wages were $22,500.At the low point of the relevant range, labour hours were 7,500 and wages were $17,500. -When using the high-low method, the two observations used are the high and low observations of the

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. -What is the net change in the budget of prevention costs if the procedures are automated in 2018? Will management agree with the changes?

Customer-response time is a measure of how long it takes for the customer to return a call.

The fixed costs from adding a second shift to a factory can best be described as a

Brad Henry has just purchased the film studio of a movie company that specializes in action adventures.He found that the company did not try to estimate the cost of making a movie.Instead it just gave the producer a budget and told him/her to make a movie within budget.Mr.Henry does not like the former movie-budget concept and desires to establish a formal cost estimation system.Required: What are some of the potential problems that may be encountered in changing from a budget to a cost estimation movie-making system?

Which cost estimation method would be described as a formal method to fit linear cost functions to past data observations?