Exam 2: Cost Behaviour

Innova,Inc.,is beginning the production of a new product.Management believes that 500 labour hours will be required to complete the new unit.An 80 percent incremental unit-time learning curve model for direct labour hours is assumed to be valid.Assume the q = -0.3219.Data on costs are as follows: Direct materials \ 50,000 per unit Direct labour \ 20 per direct labour hour Variable manufacturing overhead \ 30 per direct labour hour a.Set up a table with columns for cumulative number of units showing the cumulative total time in hours using the incremental unit-time learning curve.Complete the table for 1,2,3,and 4 units given the individual unit time for the nth unit as 500,400,351,and 320 for 1 to 4 units respectively. b.Set up a similar table assuming a 90 percent with the incremental unit-time learning curve with the individual unit time for the nth unit as 500,450,430,405 for 1 to 4 units respectively. c.What is the difference in variable cost of producing four units?

What does a correlation coefficient near +1 mean?

The following information was available about supplies cost for the second quarter of the year: Month Production Volume Supplies Cost April 700 \ 3,185 May 1,600 7,100 June 600 2,700 Using the high-low method,what is the estimate of supplies cost at 1,000 units of production?

What does a steep slope in the variable cost line indicate?

The following computer printout estimated overhead costs using multiple regression: During the year the company used 1,000 setup hours and 500 parts. -Refer to the figure.What is the predicted overhead cost?

When the volume of activity increases within the relevant range,how does the fixed cost per unit respond?

In the formula Y = F + VX,what does V refer to?

The following data were obtained from the books of Thomas Company: Manth Overhead Costs Direct Labour Hours 1 \ 14 3 2 18 5 3 25 7 4 12 4 5 26 6 2 The normal equations are =a\SigmaX+b\Sigma \SigmaY=an+b\SigmaX Use a computer or calculator to prepare the following: a.Plot the data for overhead cost as a function of direct labour hours using the scatterplot method. b.Compute the fixed and variable components of the overhead costs using the high-low method. c.Compute the fixed and variable components of the overhead costs using the least-squares method. d.Discuss the strengths and weaknesses of the three different cost estimation techniques used in parts a,b,and

The following computer printout estimated overhead costs using regression: Degrees Degrees of of Freedom 90\% 95\% 99\% Freedom 90\% 95\% 99\% 1 6.314 12.708 63.657 11 1.796 2.201 3.106 2 2.920 4.303 9.925 12 1.782 2.179 3.055 3 2.353 3.182 5.841 13 1.771 2.160 3.055 4 2.132 2.776 4.604 14 1.761 2.145 3.012 5 2.015 2.571 4.032 15 1.753 2.131 2.947 6 1.943 2.447 3.707 16 1.746 2.120 2.921 7 1.895 2.365 3.499 17 1.740 2.110 2.898 8 1.860 2.306 3.355 18 1.734 2.101 2.878 9 1.833 2.262 3.250 19 1.729 2.093 2.861 10 1.812 2.228 3.169 20 1.725 2.086 2.845 During the last accounting period 10,000 DLH were worked. -Refer to the figure.What is the t-value for a 90 percent confidence level?

Which activity driver explains changes in costs as factors other than changes in units produced?

What is characteristic of the scatterplot method of cost estimation?

The following computer printout estimated overhead costs using linear regression: Table of Selected Values: t Distribution Degrees of Freedom 90\% 95\% 99\% 15 1.753 2.131 2.947 16 1.746 2.120 2.921 17 1.740 2.110 2.898 18 1.734 2.101 2.878 19 1.729 2.093 2.861 What is the interval around Y if 95 percent confidence is desired?

What does a correlation coefficient near 0 mean?

Lee Corporation manufactures and sells party items. The following representative direct labour hours and production costs are provided for a four-month period: Month Direct Labour Hours Production January 3,600 \ 15,000 February 4,800 17,500 March 6,000 20,000 April 4,800 17,500 Total 19.200 \ 70.000 Let $\quad$ a = Fixed production costs per month $\quad$ $\quad$ b = Variable production costs per direct labour hour $\quad$ $\quad$ n = Number of months $\quad$ $\quad$ X = Direct labour hours per month $\quad$ $\quad$ Y = Total monthly production costs $\quad$ $\quad$ s = Summation -Refer to the figure.How can the monthly production cost be expressed?

Which of the following is an advantage of using the scatterplot method over the high-low method to estimate costs?

If at a given volume total costs and fixed costs are known,how are the variable costs per unit computed?

Which of the following costs is a variable cost?

Which statement best describes cost behaviour?

If an automobile manufacturer changes from skilled labour to computer-controlled assembly procedures,of what use is the past data?

Which of the following would be an example of a unit-based cost driver?