Exam 10: Determining How Costs Behave

The cumulative average-time learning model with a 85% learning curve indicates that if it takes 200 minutes to manufacture the first unit of a new model,then the second unit will take only 170 minutes to manufacture.

Dandy Manufacturing Company uses two different independent variables (machine-hours and number of packages)in two different equations to evaluate costs of the packaging department.The most recent results of the two regressions are as follows: Machine-hours: Number of packages: Required: a.What are the estimating equations for each cost driver? b.Which cost driver is best and why?

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.

At the Wild Cat Group Company,the cost of the library and information center has always been charged to the various departments based upon number of employees.Recently,opinions gathered from the department managers indicate that the number of engineers within a department might be a better predictor of library and information center costs. If the number of employees is considered the cost driver,what amount of library and information center costs will be allocated to Department A? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar. )

Time-series data analysis includes ________.

When choosing among cost drivers,managers trade off level of detail,accuracy,feasibility,and costs of estimating functions.

Which of the following functions represents the least total cost assuming the number of units is equal in each case?

The ideal database for estimating cost functions contains ________.

When using the high-low method,the numerator of the equation that determines the slope is the ________.

Taunton Company uses the high-low method to estimate its cost function.The information for 2017 is provided below: What is the estimated cost function for the above data?

The high-low method relies on only two observations,the highest and lowest,to estimate a linear cost function.

Jake's Copy Center hires a new employee.Jake knows he has to be patient with the employee until the employee gains enough experience to meet production standards.Jake is unsure of the learning curve in his operation,but he knows the first job by a new employee averages 50 minutes and the second job averages 40 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.