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 10.40P
Cost estimation, cumulative average-time learning curve. The Pacific Boat Company, which is under contract to the U S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It requests that Pacific Boat submit a proposal on the cost of producing another six PT109s. Pacific Boat reports the following cost information for the first PT109 assembled and uses a 90% cumulative average-time learning model as a basis for
- 1. Calculate predicted total costs of producing the six PT109s for the Navy. (Pacific Boat will keep the first deployment boat assembled, costed at $1,477,600, as a demonstration model for potential customers.)
Required
- 2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six PT109s in requirement 1 and (b) the predicted total costs for producing the six PT109s, assuming that there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for units produced and direct manufacturing labor-hours.
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Cost estimation, cumulative average-time learning curve. The Pacic Boat Company, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the rst of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It requests that Pacic Boat submit a proposalon the cost of producing another six PT109s. Pacic Boat reports the following cost information for the rst PT109 assembled and uses a 90% cumulative average-time learning model as a basis for forecasting direct manufacturing laborhours for the next six PT109s. (A 90% learning curve means b = −0.152004.)
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for one of its production lines. The engineering department has provided a project proposal
that estimates the following investment requirements:
) An initial investment of RM 300,000 to be paid for purchasing the new machine.
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WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant’s report shows the following.
Activity
Activity Measure (cost driver)
Unit Cost(cost per unit of activity)
Flying and maintaining aircraft
Number of flights
$
2,000
per flight
Serving passengers
Number of passengers
$
5
per passenger
Advertising and marketing
Number of promotions
$
55,000
per promotion
WSM estimates the following annual information. With 23 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $250. The lease of the 60-seat aircraft will cost $5,000,000. Other equipment costs will be $2,500,000. Administrative and other marketing costs will be $1,350,000.
Required:
a.…
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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- WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant’s report shows the following. Activity Activity Measure (cost driver) Unit Cost(cost per unit of activity) Flying and maintaining aircraft Number of flights $ 1,400 per flight Serving passengers Number of passengers $ 5 per passenger Advertising and marketing Number of promotions $ 49,000 per promotion WSM estimates the following annual information. With 14 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $195. The lease of the 60-seat aircraft will cost $3,800,000. Other equipment costs will be $1,900,000. Administrative and other marketing costs will be $1,050,000. Required: a.…arrow_forwardWSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day). WSM has hired a consultant to determine activity-based costs for this operation. The consultant’s report shows the following. Activity Activity Measure (cost driver) Unit Cost(cost per unit of activity) Flying and maintaining aircraft Number of flights $ 1,300 per flight Serving passengers Number of passengers $ 5 per passenger Advertising and marketing Number of promotions $ 48,000 per promotion WSM estimates the following annual information. With 13 advertising promotions, it will be able to generate demand for 40 passengers per flight at a fare of $190. The lease of the 60-seat aircraft will cost $3,600,000. Other equipment costs will be $1,800,000. Administrative and other marketing costs will be $1,000,000. Required: a.…arrow_forwardAs supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new, medium-sized truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. MARR is at 15% per year. You can use the assumption of repeatability in this case. Show that the same selection is made for the following methods: a. PW method b. FW method c. EUAC method Alternative A B Capital investment ALTERNATIVE A $272,000 ALTERNATIVE B $346,000 Annual expenses ALTERNATIVE A $28,800 1 ALTERNATIVE B $9,300 Useful life (years) ALTERNATIVE A =6 ALTERNATIVE B =9 Salvage value ALTERNATIVE A $ 25,000 ALTERNATIVE B $40,000arrow_forward
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