Total Overhead Costs Physician Contact Hours Billed to Patients $ 90,000 150 105,000 200 111,000 250 125,000 300 137,000 350 150,000 400 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 200 and 300 hours. Plot the linear cost function. Does the constant com- ponent of the cost function represent the fixed overhead costs of Young and Associates? Why? 2. What would be the predicted total overhead costs for (a) 150 hours and (b) 400 hours using the cost function estimated in requirement 1? Plot the predicted costs and actual costs for 150 and 400 hours. 3. Dr. Young had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 200 to 250 hours. Suppose Dr. Young, guided by the linear cost function, rejected this job because it would have brought a total increase in contribution margin of $9,000, before deduct- ing the predicted increase in total overhead cost, $10,000. What is the total contribution margin actually forgone? Required

Total Overhead Costs Physician Contact Hours Billed to Patients $ 90,000 150 105,000 200 111,000 250 125,000 300 137,000 350 150,000 400 1. Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 200 and 300 hours. Plot the linear cost function. Does the constant com- ponent of the cost function represent the fixed overhead costs of Young and Associates? Why? 2. What would be the predicted total overhead costs for (a) 150 hours and (b) 400 hours using the cost function estimated in requirement 1? Plot the predicted costs and actual costs for 150 and 400 hours. 3. Dr. Young had a chance to do some school physicals that would have boosted physician contact hours billed to patients from 200 to 250 hours. Suppose Dr. Young, guided by the linear cost function, rejected this job because it would have brought a total increase in contribution margin of $9,000, before deduct- ing the predicted increase in total overhead cost, $10,000. What is the total contribution margin actually forgone? Required

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 20BEA: Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and...

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The "x" in the overhead cost equation, y = $5.50x + $92,000, represents which of the following? total overhead costs. the variable costs. total fixed costs. the cost driver in units.
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What variables, in addition to number of service reports, might be cost drivers of weekly customerservice costs of Camilla Products?
Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?
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Characteristics of Production Process, Cost Measurement Vince Melders, of EcoScape Company, designs and installs custom lawn and garden irrigation systems for homes and businesses throughout the state. Each job is different, requiring different materials and labor for installing the systems. EcoScape estimated the following for the year: Number of direct labor hours 6,720 Direct labor cost $67,200 Overhead cost $50,400 During the year, the following actual amounts were experienced: Number of direct labor hours 6,045 Direct labor incurred $66,495 Overhead incurred $50,500 Required: 1. Should EcoScape use process costing or job-order costing? 2. If EcoScape uses a normal costing system and overhead is applied on the basis of direct labor hours, What is the overhead rate? Round your answer to the nearest cent. per direct labor hour
The graphs below represent cost behavior patterns that might occur in a company’s cost structure. The vertical axis represents total cost, and the horizontal axis represents activity output Required:For each of the following situations, choose the graph from the group a–1 that best illustrates the cost pattern involved. Also, for each situation, identify the driver that measures activity output.1. The cost of power when a fixed fee of $500 per month is charged plus an additional charge of $0.12 per kilowatt-hour used.2. Commissions paid to sales representatives. Commissions are paid at the rate of 5 percent of sales made up to total annual sales of $500,000, and 7 percent of sales above $500,000.3. A part purchased from an outside supplier costs $12 per part for the first 3,000 parts and $10 per part for all parts purchased in excess of 3,000 units.4. The cost of surgical gloves, which are purchased in increments of 100 units (gloves come in boxes of 100 pairs).5. The cost of tuition…