Exam 10: Analysis of Cost Behaviour

Adventure Gear Ltd.manufactures a self inflatable mattress that is marketed as durable and light weight.Their target market is serious adventurers who demand high quality.Quality and time data for the last two years include the following: Required: a.For each year calculate the following (round percentages to three decimal places): b.Analyze the quality data and provide that includes a description of the relationship between the quality metrics. c.Describe the factors that could have caused the increase in manufacturing cycle time and customer response time.Analyse the time data.

Managers should use past data to create a cost function and then use the exact information provided by that cost function to create the budgetary forecast for the next year.

Wilson's Language School manufactures CDs and DVDs to teach English as a Second Language.Wilson has just prepared a Cost of Quality Report, and the staff has noticed a decline in prevention costs as a percentage of total sales over a three-year period.What changes might Wilson expect to see in appraisal costs as a percentage of sales, internal failure costs as a percentage of sales, and external failure costs as a percentage of sales given this trend?

To complete the first setup on a new machine took an employee 200 minutes.Using an 80% incremental unit-time learning curve indicates that the second setup on the new machine is expected to take

C.M.Chain was to manufacture 1,000 chain saws next month.Its accountant has provided the following analysis of the total manufacturing costs. r² = 0.71 What is the estimated cost of producing the 1,000 chain saws?

The Bhaskara Corporation used regression analysis to predict the annual cost of indirect materials.The results were as follows: What is the linear cost function?

Brix, Inc.prepares frozen food for fast-food restaurants.It has two workstations, cooking and assembly.The cooking station is limited by the cooking time of the food.Assembly is limited by the speed of the workers.Assembly normally waits on food from cooking.Because the demand has increased in recent months to 2,800 dozen units, management is considering adding another cook station or else having the cooks start to work earlier.The monthly cost of operating the cooking station one more hour each day is $2,400.The cost of adding another cook station would add an average of $10 per hour.The current operating hours total eight hours a day, 22 days a month.The contribution margin of the finished products is currently $8 per dozen.Inventory carrying costs average $2.00 per dozen per month.Either the extra hour or the new cook station would increase production by 20 dozen a day with a long-run increase of 80 dozen units in finished goods inventory to 280 dozen.Required: a.What is the total production per month if the change is made? b.What is the increase in the expected monthly product contribution for each of the possible changes? Assume long-run production equals sales.

Manufacturing lead time is the sum of waiting time and manufacturing time for an order.

Describe the two assumptions upon which managers often estimate cost functions.

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

The managers of the production department have decided to use the production levels of 2019 and 2020 as examples of the highest and lowest years of operating levels.Data for those years are as follows: Required: Using the high-low method, determine the overhead cost equation for the department if litres of chemicals are used as the cost driver?

Vestor Ltd.has estimated a 90% incremental unit time learning curve applies to labour time to manufacture its new product.The first unit took 18 hours.If Vestor's estimates are correct, how many hours will be used to manufacture 4 total units?

The Door Company manufactures doors.Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. A)Appraisal B)Internal failure C)Prevention D)External failure -Audits of the effectiveness of the quality system

On-time performance is

The Brick Shirt House is concerned about its declining sales, especially the reduction in the number of customers.For the last two years its shirts have won industry awards for high quality and trend-setting styles.At the latest executive managers' meeting everyone was blaming everyone else for the decline.After much discussion, and the presenting of some fact-finding information, it was determined that sales relationships were the cause of most of the problems.Required:What may be some of the causes and how can the causes be detected if product quality is not an issue?

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 $.75 per kilogram. b.Direct labour cost is $16.75 per hour. c.Auto rental has a fixed fee of $75.00 per day plus $.50 per kilometre driven. d.Machine operating costs include $350 of maintenance per month, and $5.00 of coolant usage costs for each day the machinery is in operation.

Andrew Pallet Co., Inc.manufactures pallets for various manufacturing companies.Each new employee takes 10 hours to make the first pallet and 8 hours to make the second.The manufacturing overhead charge per hour is $80.Required: a.What is the learning curve percentage assuming the cumulative average method? b.What is the time needed to build 8 pallets by a new employee using the cumulative average-time method? Assume the rate of learning factor is -0.1520. c.What is the time needed to produce the 16th pallet by a new employee using the incremental unit-time method? Assume the rate of learning factor is -0.3219.

In the incremental unit-time learning model, the incremental unit time decreases by a constant percentage each time the cumulative quantity of units produced is doubled.

A Manufacturing Company uses two different independent variables in two different equations to evaluate the cost activities of the packaging department, machine-hours and number of packages.The most recent month's results of the two regressions are as follows: Machine hours: r² = 0.29 Number of packages: r² = 0.61 There were twenty degrees of freedom.The critical value at the 95% level is 1.729.Required: a.What are the estimating equations for each cost driver? b.Which cost driver is best and why?

Bank of Bowmanville has variable demand for its counter services.The daily demand ranges from 200 to 250 customers a day and the average banking transaction takes 6 minutes.The average daily demand is 228 customers.The bank currently has 5 staff members serving the counter and operates 7 hours a day.Required: a.What is the average customer waiting time in minutes? b.In an effort to reduce costs, the bank is considering eliminating one of its counter services staff and having a manager fill in during two hours of the day.What would be the effect of this change on wait time? What might the customers' reaction be?