Exam 10: Analysis of Cost Behaviour

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?

A linear cost function is a function in which the graph of total costs versus a single cost driver forms a straight line,within the relevant range.

Cari's Locker Service ran its freezer in January,a slow month,for 200 hours for a total cost of $60,000.In June,a peak month,the freezer ran for 1,000 hours for a total cost of $92,000. Required: Using the high-low method determine the average cost of running the machine one hour in a month were the freezer ran for 800 hours?

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?

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

Appraisal costs include all of the following EXCEPT

Newton Company used linear regression analysis to obtain the following output: Required: a.What is the total fixed cost? b.What is the variable cost per employee? c.Prepare the linear cost function. d.What is the coefficient of determination? Comment on the goodness of fit.

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

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

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 estimate of the total cost when 1,100 machine-hours are used?

C.M.Chain was to manufacture 1,000 chain saws next month.Its accountant has provided the following analysis of the total manufacturing costs. R² = 0.71 What is the estimated cost of producing the 1,000 chain saws?

Goodness-of-fit measures how well the predicted values in a cost estimating equation

Multicollinearity exists in multiple linear regression when two or more predictor variables are highly correlated with each other.

Plotting learning curve observations is helpful in selecting the appropriate learning curve model.

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.

Miller's Good Value Appliance Store is a small company that has hired you to perform some management advisory services.The following information pertains to 2016 operations. Required: Determine the operating costs using the account analysis method if Miller's expects to sell 6,500 units next year.

A mixed cost has a fixed element.

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. -How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?

Data collection problems arise when

Costs incurred by a nonconforming product detected before it is shipped to customers are