Exam 5: Cost Estimation

One advantage of the account analysis method for estimating cost behavior is that it includes actual work conditions.

Brewsky's is a chain of micro-breweries. Managers are interested in the costs of the stores and believe that the costs can be explained in large part by the number of customers patronizing the stores. Monthly data regarding customer visits and costs for the preceding year for one of the stores have been entered into the regression analysis and the analysis is as follows: Average monthly customer visits 1,462 Average monthly total costs \4 ,629 Regression Results Intercept \1 ,496 b coefficient \2 .08 0.86814 - In a regression equation expressed as y = a + bx, how is the letter b best described? (CMA adapted)

Which of the following costs would most likely be classified as variable, assuming the account analysis method is used to determine cost behaviors?

The term "relevant range," as used in cost accounting, means the range over which:

Barnard Enterprises had an average cost of $8.60 during a month when 75,000 units were produced. When production was 125,000 units several months later, the average cost dropped to $6.98. Required: (a.) Determine the fixed and variable portions of production costs. (b.) What will unit cost be when production equals 110,000 units?

Is it possible to compensate for the effects of price instability when preparing cost estimates using high-low or regression techniques?

The College of Business at Northeast College is accumulating data as a first step in the preparation of next year's budget development. One cost that is being looked at closely is administrative costs as a function of student credit hours. Data on administrative costs and credit hours for the past thirteen months are shown below: Administrative Credit Month Costs Hours July \ 129,301 250 August 82,613 115 September 225,580 1,392 October 216,394 1,000 November 258,263 1,309 December 184,445 1,112 January 219,137 1,335 February 245,000 1,373 March 209,462 1,064 April 191,925 1,123 May 249,978 1,360 June 170,41\varepsilon 420 July 128,167 315 Total \ 2,510,687 12,172 Average \ 193,130 936 The controller's office has analyzed the data and has given you the results from the regression analysis: SUMMARY OUTPUT Regression Statistics Multiple R 0.9317157 R Square 0.868094147 Adjusted R Square 0.856102705 Standard Error 20,134.92395 Observations 13 ANOVA df S S M S F Significance F Repression 1 29,349,143,514 29,349,143,514 72.3928117 3.61909-06 Residual 11 4,459,566,787 405,415,162.4 Total 12 33,808,710,301 - If the controller uses regression analysis to estimate costs, the estimate of the variable portion of administrative costs is:

The Thomas Company's total overhead costs at various levels of activity are presented below: Month Direct Labor Hours Total Overhead July 7,500 \ 272,000 August 6,000 234,000 September 9,000 319,000 October 10,500 340,500 Assume that the overhead costs above consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 9,000 direct labor hour level of activity is as follows: Utilities (V) \ 137,700 Supervisory Salaries (F) 80,000 Maintenarice (M) 101,300 319,000 Required: (a.) Using the high-low method, determine the cost formula for maintenance. (b.) Express the company's total overhead costs in linear equation form.

In the learning curve equation Y = aX^b, the Y term represents:

Which of the following is not true of regression techniques for estimating costs?

When preparing cost estimates for account analysis purposes, should the costs be extracted from the historical accounting records?