Exam 10: Quantitative Analyses of Cost Functions

Craig's Cola was to manufacture 1,000 cases of cola next week. The accountant provided the following analysis of total manufacturing costs. r² = 0.82 What is the estimated cost of producing the 1,000 cases of cola?

Use the information below to answer the following question(s). Raymaster is a small computer software company which uses the account analysis method and has hired you to perform some management advisory services. The company sold 2,500 high quality payroll programs last year. -What is the predicted indirect manufacturing labour cost if 160 machine-hours are budgeted and 170 are actually worked, assuming the estimated cost function is y = $81.04 + 5.32x?

Simple linear regression analysis provides the means to evaluate a line of regression which is fitted to a plot of data and represents

Use the information below to answer the following question(s). Miller's Good Value Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 2012 operations. -Which cost estimation method is being used by Miller's Good Value Appliance Store?

A cost analyst collected the following information for the Machining Department: Required: a. Determine the estimating cost function with machine-hours as the cost driver. Use the high-low method. b. If December's estimated machine-hours total 8,400, what is the estimated cost of the Machining Department?

Cari's Locker Service ran its freezer in January, a slow month, for 200 hours for a total cost of $60,000. In June, a peak month, the freezer ran for 1,000 hours for a total cost of $92,000. Required: Using the high-low method determine the average cost of running the machine one hour in a month were the freezer ran for 800 hours?

Time-series data analysis includes

For April, the month just ended, the cost components to make tapes were $2 per tape plus fixed costs of $10,000. One thousand tapes were produced. For May the cost to make tapes will be $2.20 per tape plus fixed costs of $10,000. Fifteen hundred tapes are expected to be produced. What are the estimates for the intercept and slope coefficient for May, respectively?

Compute the estimated costs for each of the following equations assuming the following costs for July: In addition, state whether each is for a variable, fixed, or mixed cost. A) Total estimated costs = intercept B) Total estimated costs = constant C) Total estimated costs = constant + (slope × cost driver) D) Total estimated costs = slope coefficient × cost driver In addition, state whether each is for a variable, fixed, or mixed cost.

Multicollinearity exists when which of the following conditions is present?

Use the information below to answer the following question(s). The Monroe Company uses the high-low method to estimate the cost function. The information for 2002 is provided below. -What is the constant for the estimating cost equation?

A single cost pool that includes many different costs is a heterogeneous cost pool.

Which of the following describes the intercept in a linear cost function?

Statistical significance is determined by comparing the t-Stat to a threshold call degrees of freedom.

Discuss the potential use of nonlinear curves in cost functions and cost analysis. Give some examples.

Answer the following question(s) using the information below. The Taranto Company uses the high-low method to estimate it's cost function. The information for 2012 is provided below: -What is the constant for the estimating cost equation?

Which cost estimation method would be described as a formal method to fit linear cost functions to past data observations?

Birch Canvas and Tarp manufactures canvas products in a highly automated assembly plant in Edmonton, Alberta. Their automated system is in its first year of operation, and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations the following data were collected: Required: a. Compute a cost estimating equation for each predictor variable (machine-hours and kilowatt-hours) using the high-low method. b. For July the company ran the machines for 1,600 hours and used 2,075,000 kilowatt hours of power. The overhead costs totalled $95,000. Which driver was the best predictor for July?

As part of his job as cost analyst, Max Thompson collected the following information concerning the operations of the Machining Department: Required: a. Use the high-low method to determine the estimating cost function with machine-hours as the cost driver. b. If June's estimated machine-hours total 4,200, what are the total estimated costs of the Machining Department?

The standard error of the estimated coefficient indicates whether a relationship exists between the predictor variable and the outcome variable that cannot be attributed to chance alone.