Exam 10: Analysis of Cost Behaviour

Which of the following is an equation of a variable cost function?

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?

On-time performance is

Costs of quality (COQ)reports usually do not consider opportunity costs.

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.

The Gangwere Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable.Gangwere Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation. Required: Using the high-low method determine the forecasted cost for July if the number of hours used is expected to be 3,200.

The annual capacity of a machine is 12,000 hours,with the balance being taken for routine maintenance.It takes 10 hours to process one job (each job = 1 batch),.Altogether,there are seven employees who operate the machine at different times.Orders for the first six months of the year,which are typical,have averaged 50 jobs per month.The company expects 300 orders over the next six months. Which of the following is TRUE?

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?

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 window time to 20 minutes and door time to 10 minutes;increase the costs of windows from $10 to $12 and doors from $6 to $7.50.Since Ballard is giving customers faster service it will increase its prices from $17 to $20 for windows and from $10 to $12 for doors. What is the expected daily revenue with and without doors,respectively,assuming average sales units are used and the company hires a part-time employee if doors are sold?

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 selling an average of 5 doors per day.Each door takes 12 minutes to install.What is the average waiting time if Ballard is the only worker?

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?

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

Harry's Picture manufactures various picture frames.Each new employee takes 5 hours to make the first picture frame and 4 hours to make the second.The manufacturing overhead charge per hour is $20. Required: a.What is the learning-curve percentage,assuming the cumulative average method? b.What is the time needed to build 8 picture frames by a new employee using the cumulative average-time method? Assume the rate of learning factor is -0.1520. c.What is the time needed to produce the 16th frame by a new employee using the incremental unit-time method? Assume the rate of learning factor is -0.3219.

The Bhaskara Corporation used regression analysis to predict the annual cost of indirect materials.The results were as follows: What is the linear cost function?

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?

Use the information below to answer the following question(s). Dylan Products has a budget of $1,200,000 in 2015 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 2015? Will management agree with the changes?

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.

Answer the following question(s)using the information below. The Taranto Company uses the high-low method to estimate it's cost function.The information for the current year is provided below: -What is the slope coefficient per machine-hour?

Define cost of quality (COQ),list the four categories,and provide an example of each.

The cumulative average-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.