Exam 3: Cost Behavior

Figure 3-9 Hereford Company is planning to introduce a new product with an 80 percent learning rate for production for batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are $10,000 in fixed costs not subject to learning. Refer to Figure 3-9. What is the batch unit time (labor hours) to produce 2,000 units based on the cumulative average time learning curve?

The basis of the learning curve is that as we perform an action over and over, we improve, and each additional performance takes less time than the preceding ones.

Which of the following statements is TRUE about the learning curve?

For each of the following situations, draw a graph that best describes the cost behavior pattern. The vertical axis represents costs, and the horizontal axis represents volume. a. Direct materials per unit b. Depreciation expense on a building per urit c. An employee paid $\$ 50$ per hour with a guarenteed salary of $\$ 1,000$ per week d. A consultant paid $\$ 100$ per hou with a maximum fee of $\$ 2,000$ e. Salaries of teachers where each teacher can handle a maximum of 15 students

Figure 3-6 The Stanford Company incurred the following maintenance cost during a five month period: Refer to Figure 3-6. Using a computer or calculator, compute the estimate of maintenance costs at 100 units of production using the method of least squares. This value would be

Figure 3-1 Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units. See Figure 3-1. What is the total maintenance cost per unit produced?

If at a given volume total costs and fixed costs are known, the variable costs per unit may be computed as follows:

The following excel printout provides information to estimate overhead costs using linear regression: Required:

Barron Enterprises has the following information about its truck fleet miles and operating costs: What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2017 is 500,000 miles?

An equipment lease that specifies a payment of $8,000 per month plus $7 per machine hour used is an example of a

Based on managerial judgement, the best predictor of manufacturing costs is the units available.

The industrial engineering method is used to determine which activities, and in what amounts, are necessary to complete a process.

The expenses that result when organizations acquire many multiperiod service capacities by paying cash up front or by entering into an explicit contract that requires periodic cash payments are called:

Tornado Enterprises has the following information available regarding costs at various levels of monthly production: Required:

In the method of least squares, the deviation is the difference between the

Figure 3-4 The following information is available for electricity costs for the last six months of the year: Refer to Figure 3-4. Using the high-low method, estimated variable cost per unit of production is

Which of the following is an example of a committed fixed expense?

The three quantitative methods of separating a mixed cost into its fixed and variable components are: the high-low method, the scatter plot method and the method of __________ .

Figure 3-4 The following information is available for electricity costs for the last six months of the year: Refer to Figure 3-4. What are the fixed costs?

Sandusky Corporation has the following costs for 1,000 units: What is the total cost of direct materials for 100 units?