Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 10, Problem 10.21E
Estimating a cost function. The controller of the Javier Company is preparing the budget for 2018 and needs to estimate a cost function for delivery costs. Information regarding delivery costs incurred in the prior two months are:
| Month | Miles Driven | Delivery Costs |
| August | 12,000 | $10,000 |
| September | 17,000 | $13,000 |
- 1. Estimate the cost function for delivery.
Required
- 2. Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.
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Statler Corporation wants to find an equation to estimate some of their monthly operating costs for the operating budget for 2021. The following cost and other data were gathered for 2020:
(Click the icon to view the cost and other data)
Read the requirements.
Requirement 1. Which of the preceding costs is variable? Fixed? Mixed? Explain.
Cost
function
Mixed
Fixed
Variable
Cost
Maintenance
Health insurance
Shipping costs
Requirement 2. Using the high-low method, determine the cost function for each cost.
Begin by selecting the general formula that represents the linear cost function for each cost.
y = a +bX
y = a
y = bX
Maintenance
Health insurance
Shipping costs
Now determine the cost function for each cost. (Enter all values in the same format as the general linear formula. If an input field is not used in the
Cost function
Maintenance
Explanation
The cost neither remains constant in total nor remains constant per unit.
Although the cost driver varies from month to month, the total…
The controller of the
Stump
Company is preparing the budget for
2021
and needs to estimate a cost function for delivery costs. Information regarding delivery costs incurred in the prior 2 months are:
LOADING...
(Click
the icon to view the information.)
Requirements
1. Estimate the cost function for delivery.
2. Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.
Requirement 1. Estimate the cost function for delivery.
Delivery costs =
+ (
×
)
Delivery costs =
+ (
×
)
Requirement 2. Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.
The cost function in requirement 1 is an estimate of how costs behave
▼
outside of
within
the relevant range, not at cost levels
▼
outside
within
the relevant range. If there are no months with zero miles driven represented in the delivery cost…
Howard Cooper, the president of Campbell Computer Services, needs your help. He wonders about the potential effects on the firm's
net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year 3.
Standard rate and variable costs
Service rate per hour
$
85.00
Labor cost
37.00
Overhead cost
7.10
Selling, general, and administrative cost
Expected fixed costs
Facility maintenance
Selling, general, and administrative
3.80
$522,000
142,000
Required:
a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 45,000 hours of
services in Year 3.
b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can
achieve. According to the consultant's analysis, if Campbell charges customers $80 per hour, the firm can achieve 50,000 hours of
services. Prepare a flexible budget using the consultant's assumption.
c. The same…
Chapter 10 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 10 - What two assumptions are frequently made when...Ch. 10 - Describe three alternative linear cost functions.Ch. 10 - What is the difference between a linear and a...Ch. 10 - High correlation between two variables means that...Ch. 10 - Name four approaches to estimating a cost...Ch. 10 - Describe the conference method for estimating a...Ch. 10 - Describe the account analysis method for...Ch. 10 - List the six steps in estimating a cost function...Ch. 10 - When using the high-low method, should you base...Ch. 10 - Describe three criteria for evaluating cost...
Ch. 10 - Define learning curve. Outline two models that can...Ch. 10 - Discuss four frequently encountered problems when...Ch. 10 - Prob. 10.13QCh. 10 - All the independent variables in a cost function...Ch. 10 - Multicollinearity exists when the dependent...Ch. 10 - HL Co. uses the high-low method to derive a total...Ch. 10 - A firm uses simple linear regression to forecast...Ch. 10 - In regression analysis, the coefficient of...Ch. 10 - A regression equation is set up, where the...Ch. 10 - What would be the approximate value of the...Ch. 10 - Estimating a cost function. The controller of the...Ch. 10 - Identifying variable-, fixed-, and mixed-cost...Ch. 10 - Various cost-behavior patterns. (CPA, adapted)....Ch. 10 - Matching graphs with descriptions of cost and...Ch. 10 - Account analysis, high-low. Stein Corporation...Ch. 10 - Account analysis method. Gower, Inc., a...Ch. 10 - Prob. 10.27ECh. 10 - Estimating a cost function, high-low method. Lacy...Ch. 10 - Linear cost approximation. Dr. Young, of Young and...Ch. 10 - Cost-volume-profit and regression analysis....Ch. 10 - Regression analysis, service company. (CMA,...Ch. 10 - High-low, regression. May Blackwell is the new...Ch. 10 - Learning curve, cumulative average-time learning...Ch. 10 - Learning curve, incremental unit-time learning...Ch. 10 - High-low method. Wayne Mueller financial analyst...Ch. 10 - High-low method and regression analysis. Market...Ch. 10 - High-low method; regression analysis. (CIMA,...Ch. 10 - Regression, activity-based costing, choosing cost...Ch. 10 - Interpreting regression results. Spirit...Ch. 10 - Cost estimation, cumulative average-time learning...Ch. 10 - Cost estimation, incremental unit-time learning...Ch. 10 - Regression; choosing among models. Apollo Hospital...Ch. 10 - Multiple regression (continuation of 10-42). After...Ch. 10 - Cost estimation. Hankuk Electronics started...Ch. 10 - Prob. 10.45PCh. 10 - Interpreting regression results, matching time...Ch. 10 - Purchasing department cost drivers, activity-based...Ch. 10 - Purchasing department cost drivers, multiple...
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