Balcom Enterprises is planning to introduce a new product that will sell for $110 a unit.Manufacturing cost estimates for 20,000 units for the first year of production are: • Direct materials $1,000,000 • Direct labor $720,000 (based on $18 per hour × 40,000 hours) Although overhead has not be estimated for the new product,monthly data for Balcom's total production for the last two years has been analyzed using simple linear regression.The analysis results are as follows: \[\begin{array} { | l | l | } \hline \text { Dependent wariable } & \text { Factory overhead costs } \\ \hline \text { Independent variable } & \text { Direct labor hours } \\ \hline \text { Intercept } & \$ 120,000 \\ \hline \text { Coefficient on independent } & \$ 5.00 \\ \text { variable } & \\ \hline \text { Coefticient of correlation } & 0.911\\ \hline \text { R } ^ { 2 } & 0.814 \\ \hline \end{array}\] Based on this information,what is the expected contribution margin per unit to be earned during the first year on 20,000 units of the new product? (Assume that all marketing and administrative costs are fixed. )

A) $14 B) $13 C) $99 D) $32 A) $14 B) $13 C) $99 D) $32

Market Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: \[\begin{array} { | l | r | } \hline \text { Units Procuced } & \text { Marginal Labor Time } \\ \hline 1 & 250.00 \\ \hline 2 & 225.00 \\ \hline \end{array}\] Required: (a. )How much time will be needed to complete the 4th unit? (b. )How much time will be needed to complete the 8th unit? (c. )How much time will be needed to complete the 16th unit?

(a. )225 × .9 = 202.50 (b. )20

The Macon Company uses the high-low method to determine its cost equation.The following information was gathered for the past year: \[\begin{array} { | l | r | r | } \hline & \begin{array} { r } \text { Machine } \\ \text { Hours } \end{array} & \begin{array} { r } \text { Direct Labor } \\ \text { Costs } \end{array} \\ \hline \text { Busiest month (June) } & 14,000 & \$ 200,000 \\ \hline \begin{array} { l } \text { Slowest month } \\ \text { (December) } \end{array} & 6,000 & \$ 120,000 \\ \hline \end{array}\] What are the direct labor costs per machine hour?

A) $20.00. B) $16.00. C) $14.29. D) $10.00. A) $20.00. B) $16.00. C) $14.29. D) $10.00.

The Macon Company uses the high-low method to determine its cost equation.The following information was gathered for the past year: \[\begin{array} { | l | r | r | } \hline & \begin{array} { r } \text { Machine } \\ \text { Hours } \end{array} & \begin{array} { r } \text { Direct Labor } \\ \text { Costs } \end{array} \\ \hline \text { Busiest month (June) } & 14,000 & \$ 200,000 \\ \hline \begin{array} { l } \text { Slowest month } \\ \text { (December) } \end{array} & 6,000 & \$ 120,000 \\ \hline \end{array}\] If Macon expects to use 10,000 machine hours next month,what are the estimated direct labor costs?

A) $160,000. B) $180,000. C) $175,000. D) $150,000. A) $160,000. B) $180,000. C) $175,000. D) $150,000.

Exam 5: Cost Estimation

Thane Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow: Month Machine Hours Electricity Costs January 2,500 18,400 February 2,900 21,000 March 1,900 13,500 April 3,100 23,000 May 3,800 28,250 June 3,300 22,000 Juby 4,100 24,750 August 3,500 22,750 September 2,000 15,500 October 3,700 26,000 November 4,700 31,000 December 4,200 27,750 $Thane Company is interested in establishing the relationship between electricity costs and machine hours.Data have been collected and a regression analysis prepared using Excel.The monthly data and the regression output follow: \begin{array} { | l | r | r | } \hline \text { Month } & \text { Machine Hours } & \text { Electricity Costs } \\ \hline \text { January } & 2,500 & 18,400 \\ \hline \text { February } & 2,900 & 21,000 \\ \hline \text { March } & 1,900 & 13,500 \\ \hline \text { April } & 3,100 & 23,000 \\ \hline \text { May } & 3,800 & 28,250 \\ \hline \text { June } & 3,300 & 22,000 \\ \hline \text { Juby } & 4,100 & 24,750 \\ \hline \text { August } & 3,500 & 22,750 \\ \hline \text { September } & 2,000 & 15,500 \\ \hline \text { October } & 3,700 & 26,000 \\ \hline \text { November } & 4,700 & 31,000 \\ \hline \text { December } & 4,200 & 27,750 \\ \hline \end{array} If the controller uses regression analysis to estimate costs,the cost equation for electricity cost is:$ If the controller uses regression analysis to estimate costs,the cost equation for electricity cost is:

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Question 1

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Assume that as part of their recent merger,Dell and EMC are perfecting a new device that will access and coordinate the Internet of Things.The new company is interested in estimating the impact of learning on the cost of producing this new device and plan to use data from previous products to estimate the learning parameter.What are the advantages of doing this? What are the disadvantages?

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Data from previous products,which are likely to be similar,provide information about how learning might affect the cost of the new product.The disadvantage is that the products are different and these differences might lead to learning rates that are different and,as a result,cost estimates that are not realistic.Also,since Dell is primarily a hardware company and EMC primarily works with digital or cloud-based solutions,the learning curve of these two different environments are very different in functionality and may result in unrealistic results.

One disadvantage of the high-low method is the highest and lowest points may not be representative of normal operating activities.

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

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Question 4

The following manufacturing costs were incurred by the Miracle Mile Company in 2015: Direct materials \ 225,000 Direct labor 350,000 Manufacturing overhead 470,000 These costs were incurred to produce 50,000 units of product.Variable manufacturing overhead was 70% of the direct materials cost.In 2016,the direct material and variable overhead costs per unit will increase by 12%,but the direct labor costs per unit are not expected to change.Fixed manufacturing costs are expected to increase by 8%. Required: (a. )Prepare a cost estimate for an activity level of 40,000 units of product in 2016. (b. )Determine the total product costs per unit for 2015 and 2016.

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Question 5

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: Month Actinistrative Costs Credit 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 184,449 1,112 January 219,137 1,339 February 245,000 1,373 March 209,462 1,064 April 191,925 1,123 May 249,978 1,360 June 170,418 420 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: $The College of Business at Northeast College is accumulating data as a first step in the preparation of next year's budget development.One cost that is being looked at closely is administrative costs as a function of student credit hours.Data on administrative costs and credit hours for the past thirteen months are shown below: \begin{array} { | l | r | r | } \hline \text { Month } & \text { Actinistrative Costs } & \text { Credit Hours } \\ \hline \text { July } & \$ 129,301 & 250 \\ \hline \text { August } & 82,613 & 115 \\ \hline \text { September } & 225,580 & 1,392 \\ \hline \text { October } & 216,394 & 1,000 \\ \hline \text { November } & 258,263 & 1,309 \\ \hline \text { December } & 184,449 & 1,112 \\ \hline \text { January } & 219,137 & 1,339 \\ \hline \text { February } & 245,000 & 1,373 \\ \hline \text { March } & 209,462 & 1,064 \\ \hline \text { April } & 191,925 & 1,123 \\ \hline \text { May } & 249,978 & 1,360 \\ \hline \text { June } & 170,418 & 420 \\ \text { July } & 128,167 & 315 \\ \hline \text { Total } & \$ 2,510,687 & 12,172 \\ \hline \text { Average } & \$ 193,130 & 936 \\ \hline \end{array} The controller's office has analyzed the data and has given you the results from the regression analysis: If the controller uses regression analysis to estimate costs,the cost equation for administrative salaries is:$ If the controller uses regression analysis to estimate costs,the cost equation for administrative salaries is:

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Question 6

When using past data to predict a cost that has fixed and variable components,it is possible to have an equation with a negative intercept.Does this mean that at a zero production level,the company will make money on its fixed costs? Explain.

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Question 7

Balcom Enterprises is planning to introduce a new product that will sell for $110 a unit.Manufacturing cost estimates for 20,000 units for the first year of production are: • Direct materials $1,000,000 • Direct labor $720,000 (based on $18 per hour × 40,000 hours) Although overhead has not be estimated for the new product,monthly data for Balcom's total production for the last two years has been analyzed using simple linear regression.The analysis results are as follows: Dependent wariable Factory overhead costs Independent variable Direct labor hours Intercept \ 120,000 Coefficient on independent \ 5.00 variable Coefticient of correlation 0.911 0.814 Based on this information,what is the expected contribution margin per unit to be earned during the first year on 20,000 units of the new product? (Assume that all marketing and administrative costs are fixed. )

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Question 8

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

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Question 9

Market Products,Inc. ,has found that new products follow a learning curve.The first two units have been completed with the following results: Units Procuced Marginal Labor Time 1 250.00 2 225.00 Required: (a. )How much time will be needed to complete the 4^th unit? (b. )How much time will be needed to complete the 8^th unit? (c. )How much time will be needed to complete the 16^th unit?

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Question 10

A disadvantage of the high-low method of cost analysis is that it:

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Question 11

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 c ustomer-visits 1,462 Average monthly total costs \ 4,629 Regression Results Intercept \ 1,496 bcoefficient \ 2.08 0.86814 How is the letter x in the regression equation best described? (CMA adapted)

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Question 12

Markham,Inc.has received a contract for 8 units of a new product.The contract is a cost-plus contract,with the total to be received equal to the total labor cost + 30%.Markham found that the first unit of a new product required 90 hours to complete.The second unit was completed using only 76.5 hours.Markham believes that the rate of learning that was observed will continue for all 8 units of the contract.The labor wage paid is $40/hour.The following factors are available for various rates of learning: 80% learning,b = -.3219;85%,b = -.2345;90%,b = -.1520;95%,b = -.0740. Required: (a. )What will the total labor cost be for the contract? (b. )What will be the total fee for the contract?

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Question 13

The Macon Company uses the high-low method to determine its cost equation.The following information was gathered for the past year: Machine Hours Direct Labor Costs Busiest month (June) 14,000 \ 200,000 Slowest month (December) 6,000 \ 120,000 What are the direct labor costs per machine hour?

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Question 14

Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of the material handled? (CPA adapted)

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Question 15

The Macon Company uses the high-low method to determine its cost equation.The following information was gathered for the past year: Machine Hours Direct Labor Costs Busiest month (June) 14,000 \ 200,000 Slowest month (December) 6,000 \ 120,000 If Macon expects to use 10,000 machine hours next month,what are the estimated direct labor costs?

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Question 16

Given actual amounts of a semi-variable cost for various levels of output,the method that will always give the most reliable measure of the fixed and variable components is the:

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Question 17

The McGraw Company is accumulating data to be used in preparing its annual profit plan for the coming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff has suggested that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs.Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows: (CMA adapted) Using the high-low method to estimate cost behavior,420 maintenance hours in a month would mean the maintenance costs would be budgeted at:

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Question 18

The McGraw Company is accumulating data to be used in preparing its annual profit plan for the coming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff has suggested that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs.Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows: (CMA adapted) Based upon the data derived from the regression analysis,420 maintenance hours in a month would mean the maintenance costs would be budgeted at: (rounded to the nearest whole dollar)

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Question 19

The McGraw Company is accumulating data to be used in preparing its annual profit plan for the coming year.The cost behavior pattern of the maintenance costs must be determined.The accounting staff has suggested that linear regression be employed to derive an equation in the form of y = a + bx for maintenance costs.Data regarding the maintenance hours and costs for last year and the results of the regression analysis are as follows: (CMA adapted) What would be the cost equation if the high-low method is used?

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Question 20

Showing 1 - 20 of 130

One disadvantage of the high-low method is the highest and lowest points may not be representative of normal operating activities.

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

When using past data to predict a cost that has fixed and variable components,it is possible to have an equation with a negative intercept.Does this mean that at a zero production level,the company will make money on its fixed costs? Explain.

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

A disadvantage of the high-low method of cost analysis is that it:

The Macon Company uses the high-low method to determine its cost equation.The following information was gathered for the past year: Machine Hours Direct Labor Costs Busiest month (June) 14,000 \ 200,000 Slowest month (December) 6,000 \ 120,000 What are the direct labor costs per machine hour?

Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of the material handled? (CPA adapted)

Given actual amounts of a semi-variable cost for various levels of output,the method that will always give the most reliable measure of the fixed and variable components is the:

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 5: Cost Estimation

One disadvantage of the high-low method is the highest and lowest points may not be representative of normal operating activities.

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

When using past data to predict a cost that has fixed and variable components,it is possible to have an equation with a negative intercept.Does this mean that at a zero production level,the company will make money on its fixed costs? Explain.

In the learning curve equation Y = aXb,the X term represents:

A disadvantage of the high-low method of cost analysis is that it:

The Macon Company uses the high-low method to determine its cost equation.The following information was gathered for the past year: Machine Hours Direct Labor Costs Busiest month (June) 14,000 \ 200,000 Slowest month (December) 6,000 \ 120,000 What are the direct labor costs per machine hour?

Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of the material handled? (CPA adapted)

Given actual amounts of a semi-variable cost for various levels of output,the method that will always give the most reliable measure of the fixed and variable components is the:

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters

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

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