Exam 10: Analysis of Cost Behaviour

What common sense criteria should be applied to statistical analysis when evaluating cost drivers using regression analysis?

Use the information below to answer the following question(s).The Barnett Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable.Barnett Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation. -What is the cost function derived from using the high-low method?

Compare financial and nonfinancial performance, and explain why planning and control systems should consider both.

The ideal data base for estimating cost functions quantitatively has the following characteristic:

Acme Janitor Service has always taken pride in the fact that it had one of the highest customer response times in the home cleaning service industry.However, as the products manufactured for this industry have become more complex, the company's customer response time has declined.Required:Why do you think that response time declined if all other quality factors have remained the same?

Which of the following is NOT included in customer response time?

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 total cost per unit sold?

When an average unit of time declines by a constant percentage each time that the cumulative quantity of units produced is doubled, it is known as

It is appropriate to incorporate expected learning-curve efficiencies when evaluating performance.

The new cost analyst in your accounting department has just received a computer-generated report that contains the results of a simple regression program for cost estimation.The summary results of the report appear as follows: r² = 0.75 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?

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 would be their estimated cost per unit if Raymaster expects to sell 2,000 units next year?

The coefficient of determination (r²)measures the percentage of variation in Y explained by X (the independent variable).

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 materials cost is $1.30 per kilogram. b.Direct labour cost is $19.20 per hour. c.Auto rental has a fixed fee of $20.00 per day plus $.40 per kilometre driven. d.Machine operating costs include $500 of maintenance per month, and $2 of coolant usage costs for each day the machinery is in operation.

Brandt Cheque Encoders employs 30 individuals.Ten employees are paid $10 per hour for 173 hours a month and the rest are salaried employees paid $6,000 a month.How would total costs of personnel be classified?

Lumberjack Inc.is a manufacturer of equipment for the forestry industry.The following account analysis represents account data for the past fiscal year: The company produced 25,000 pieces of equipment in the past fiscal year.Required: 1.Create a linear cost function for total costs using the account analysis method.2.Forecast total cost for the upcoming year if production is budgeted at 30,000 pieces of equipment.

Brown Laundry has a variable demand.The daily demand ranges from 100 to 140 customers a day with an average of 5 items.The average daily demand is 110 customers.The laundry operates 10 hours a day.Each order takes approximately 5 minutes.Required: a.What is the average customer waiting time in minutes? b.What is the cycle time for an order? c.The manager has decided that the waiting time is too long and has increased the work day to 11 hours.What is the waiting time now? Will the customers be any happier?

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 denominator in the equation that determines the slope is the

When estimating a cost function, cost behavior can be approximated by a linear cost function within the relevant range.

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. -Using the high-low method determine the slope coefficient per labour hour at Bradco Restoration?

Inventory carrying costs include the opportunity cost of the investment.