Exam 10: Analysis of Cost Behaviour

A paper company manufactures cardboard boxes.Because the efforts of manufacturing are approximately equal between labour and machinery,management is considering other possible cost drivers.By considering different cost drivers,it is anticipated that the estimating process can be improved.The following cost estimating equations with their r,values have been determined for 2015: Required: a.Which equation should be selected for the analysis? b.What are other factors that should be included in the selection of the estimating equation?

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?

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.

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 manufacturing labour is $20 per hour. b.Direct materials cost $8.00 per cubic metre. c.Utilities have a minimum charge of $2,000 plus a charge of $0.05 per kilowatt hour. d.Factory supplies average $10 per day plus $1.00 for each machine-hour per day. e.Total manufacturing amortization includes $5,000 for straight-line plant amortization plus machinery amortization of $100 for each day operated.

Use the information below to answer the following question(s). The Skip Corporation has assembled the following data pertaining to certain costs which cannot be easily identified as either fixed or variable.Skip Corporation has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation. -The total cost at an operating level of 2,850 hours would be

The customer response time reveals how quickly customers respond to a company's new products.

The costs relating to product testing are classified as prevention costs.

Regression analysis differs from high-low analysis in that regression analysis

The slope of the line of regression is

Statistical significance of independent variables is determined by comparing the t-value to a threshold called degrees of freedom.

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 $1.50 per kilogram. b.Direct labor cost is $33.50 per hour. c.Auto rental has a fixed fee of $150.00 per day plus $1.00 per kilometre driven. d.Machine operating costs include $700 of maintenance per month,and $10.00 of coolant usage costs for each day the machinery is in operation.

Try-Us-First Motors manufactures and sells off-road vehicles.The September sales were $6,000,000.Monthly design costs are $112,000 and rework is running at $75,000 per month.Its painting department is fully automated and requires substantial inspection to keep the machines operating properly.An improperly painted vehicle is very expensive to correct,and inspection hours for the 8,000 vehicles painted in September totaled 2,000 hours by 14 employees,who earn an average of $28 an hour.Ten litres of paint were used on average for each vehicle.The standard amount of paint per vehicle is nine litres.The cost of inspection for September was equal to the budgeted amount of $56,000. What are appraisal costs as a percentage of sales?

When new products are introduced,learning-curve effects can have a major influence on production scheduling.

The costs relating to new materials testing are classified as appraisal costs.

The managers of the production department have decided to use the production levels of 2013 and 2016 as examples of the highest and lowest years of operating levels.During 2013 the department used 280,000 litres of chemicals and during 2016 it used 240,000 litres.The department's costs for 2013 were $460,000,but only $400,000 in 2016. Required: Using the high-low method determine the cost estimating equation for the department if litres of direct material are used as the cost driver?

Costs of Quality (COQ)are classified into four categories: prevention costs,appraisal costs,inspection costs,and warranty costs.

________ is the amount of time from when a customer places an order for a product or requests a service to when the product or service is delivered to the customer.

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

Quick Shop Printing has two workstations,cutting and pasting.The cutting station is limited by the speed of operating the cutting machine.Pasting is limited by the speed of the workers.Pasting normally waits on work from cutting.Each department currently works an eight-hour day. The company is considering having cutting begin work two hours earlier than pasting each day,the two departments would then finish their work at the same time.Not only does this eliminate the bottleneck,but it increases finished units produced each day by 80 units.All units produced can be sold even though the change increases inventory stock by 10 percent from 200 units.The cost of operating the cutting department two more hours each day is $800.The contribution margin of the finished products is $3 each.Inventory carrying costs are $0.20 per unit per day. What is the change in the daily contribution margin if the change is made?

For February,the cost components of a picture frame include $0.25 for the glass,$.65 for the wooden frame,and $0.80 for assembly.The assembly desk and tools cost $400.1,000 frames are expected to be produced in the coming year.What cost function best represents these costs?