Cornerstones of Cost Management (Cornerstones Series)
3rd Edition
ISBN: 9781285751788
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 3, Problem 28E
To determine
Calculate total costs of Company ABC.
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Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:
Regression Statistics
Multiple R
0.9798
R Square
0.9560
Observations
30
Coefficients
Standard Error
T Stat
P-Value
Intercept
174,302
60,902
2.86
0.021
Production (X)
11.06
0.9237
11.97
0.000
What total cost would Star predict for a month in which production is 2,000 units?
Multiple Choice
$21,419
$62,749
$173,282
$196,422
The Perize Corporation used regression analysis to predict the annual cost of indirect materials. The results were as follows:
Indirect Materials Cost Explained by Units Produced
Constant $15,685
Standard error of Y estimate $3,500
r2 0.7832
Number of observations 20
X coefficient(s) 10.25
Standard error of coefficient(s) 2.1876
What is the cost function?
Select one:
a. Y = $19,185 + $4.48X
b. Y = $15,685 + $10.25X
c. Y = $12,285 + $10.25X
d. Y = $3,500 + $5.15X
If the total cost function is y = 6,300 + 2X, calculate the variable cost for 4,400 units.
A. $8,800
B. $6,300
C. $12,600
O D. $15,100
O O
Chapter 3 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 3 - Why is knowledge of cost behavior important for...Ch. 3 - How does the length of the time horizon affect the...Ch. 3 - Prob. 3DQCh. 3 - What is the relationship between flexible...Ch. 3 - What is the relationship between committed...Ch. 3 - Describe the difference between a variable cost...Ch. 3 - Why do mixed costs pose a problem when it comes to...Ch. 3 - Why is a scattergraph a good first step in...Ch. 3 - What are the advantages of the scatterplot method...Ch. 3 - Prob. 10DQ
Ch. 3 - What is meant by the best-fitting line? Is the...Ch. 3 - When is multiple regression required to explain...Ch. 3 - Explain the meaning of the learning curve. How do...Ch. 3 - Assume you are the manager responsible for...Ch. 3 - Some firms assign mixed costs to either the fixed...Ch. 3 - Callies Gym is a complete fitness center. Owner...Ch. 3 - Corazon Manufacturing Company has a purchasing...Ch. 3 - Darnell Poston, owner of Poston Manufacturing,...Ch. 3 - Dohini Manufacturing Company had the following 12...Ch. 3 - Refer to Cornerstone Exercise 3.4 for data on...Ch. 3 - Prob. 6CECh. 3 - The controller for Dohini Manufacturing Company...Ch. 3 - Prob. 8CECh. 3 - Classify the following costs of activity inputs as...Ch. 3 - SmokeCity, Inc., manufactures barbeque smokers....Ch. 3 - Cashion Company produces chemical mixtures for...Ch. 3 - For the following activities and their associated...Ch. 3 - Prob. 13ECh. 3 - Vargas, Inc., produces industrial machinery....Ch. 3 - Penny Davis runs the Shear Beauty Salon near a...Ch. 3 - Shirrell Blackthorn is the accountant for several...Ch. 3 - Deepa Dalal opened a free-standing radiology...Ch. 3 - Prob. 18ECh. 3 - The controller of the South Charleston plant of...Ch. 3 - Lassiter Company used the method of least squares...Ch. 3 - Sweet Dreams Bakery was started five years ago by...Ch. 3 - Prob. 22ECh. 3 - Bordner Company manufactures HVAC (heating,...Ch. 3 - Sharon Glessing, controller for Janson Company,...Ch. 3 - The graphs below represent cost behavior patterns...Ch. 3 - Starling Co. manufactures one product with a...Ch. 3 - Prob. 27ECh. 3 - Prob. 28ECh. 3 - Prob. 29ECh. 3 - Prob. 30ECh. 3 - Rolertyme Company manufactures roller skates. With...Ch. 3 - St. Teresas Medical Center (STMC) offers a number...Ch. 3 - Big Mikes, a large hardware store, has gathered...Ch. 3 - Kimball Company has developed the following cost...Ch. 3 - The management of Wheeler Company has decided to...Ch. 3 - DeMarco Company is developing a cost formula for...Ch. 3 - Prob. 37PCh. 3 - Friendly Bank is attempting to determine the cost...Ch. 3 - Randy Harris, controller, has been given the...Ch. 3 - Prob. 40PCh. 3 - Harriman Industries manufactures engines for the...Ch. 3 - Thames Assurance Company sells a variety of life...
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- Crystal Mining has completed the following data to analyze utility cost:MonthMachine Hours Utility CostJanuary200P 300February325440March400480April410490May525620June680790July820840August900900Required:1.Use the least squaresmethod to develop a formula for budgeting utility cost. (Round off value of b to two decimal places and the value of a to nearest peso.2.Prepare flexible budget with separate variable and fixed categories for utility costs at 350, 500, and 600 machine hours.arrow_forwardNewport, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output: Regression Statistics Multiple R R Square Observations 0.7225 0.8500 30 Coefficients Standard Error T Stat P-Value 0.021 Intercept Production (X) 31,000 5.87 3,493 2.86 0.4640 14.30 0.000 a. What is Newport's total fixed cost? Total Fixed Cost b. What is Newport's variable cost per unit? (Round your intermediate calculations to 2 decimal places.) Variable Cost per unit c. What total cost would Newport predict for a month in which they sold 5,000 units? Total Costs d. What proportion of variation in Newport's cost is explained by variation in production? (Round your intermediate calculations to 2 decimal places.) Proportion of Variationarrow_forwardThe actual margin per unit and margin per unit estimated in the plan are $6 and $8, respectively. The actual volume and the volume estimated in the plan are 5,000 units and 10,000 units, respectively. What is the margin variance of the business? O-$10,000 $5,000 -$20,000 $10,000 O$20,000arrow_forward
- LO.8 (Appendix; Least squares regression) UpTop Mining has compiled the follcowing data to analyze utilitry costs: Month Machine Hours Utility cost January 200 $300 February 325 440 March 400 480 April 410 490 May 525 620 June 680 790 July 820 840 August 900 900 Use the least squares method to develop a formula for budgeting utility cost.arrow_forwardTom uses his computer to calculate the following regression formula:Weekly total costs = $18,791 + ($19.97 * Number of orders per week) Draw the regression line on your graph. Use your graph to evaluate the regression line using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Is the cost function estimated using the high-low method a close approximation of the cost function estimated using the regression method? Explain briefly.arrow_forwardRefer to Pearce Company Using the three-variance approach, what is the efficiency variance? A. $11,770 F B. $2,200 F C. $7,975 U D. $5,775 Uarrow_forward
- ACE CORP HAS THE FOLLOWING DL STANDARDS: DLHRS/UNIT 1.25 DL COST/HR $32 ACE USED 21,780 DLHRS TO PRODUCE 18,000 UNITS. ACTUAL DL COSTS = $713,295. WHAT IS THE AMOUNT OF THE DL PRICE VARIANCE? ___________ IS THE VARIANCE FAVORABLE OR UNFAVORABLE? ___________ REFER TO QUESTION 1. WHAT IS THE AMOUNT OF THE DL EFFICIENCY VARIANCE? _________ IS THE VARIANCE FAVORABLE OR UNFAVORABLE__________arrow_forwardBased on analyzing the production cost (Y) to units produced (X), the following relationship was found: Y=$5,000+$20X. The $20 in the equation represents: Select one: Oa. Variable production costs per unit Ob. None of the answers given Oc Total variable production costs. O d. Total fixed production costs Oe. Fixed production costs per unit. Next page agearrow_forward5. The unit variable cost is $6.43, unit selling price is $10, total fixed costs are $638.03, and the projected sales are 430 units. Calculate: a. Net income b. Contribution Marginarrow_forward
- An auditor uses regression analysis to evaluate relationship between utility cost and machine hours. The following information is available based from monthly cost and machine hours of the company:· Intercept: 3,000 · Regression is .90· Correlation coefficient is .80· SD error 2,000· No of observations: 1,000What is the expected annual utility cost of the company if it has 150 machines, and it will use 5,000 hours for next year?arrow_forwardA manager has the option of purchasing 1, 2, or 3 machines. The computed VC is 10perunitandrevenueperunitis40. FC and potential volumes are as follows: # of Machines Fixed Cost Range of Output 1 $ 9,600 0-300 2 15,000 301-600 3 20,000 601-900 a. Determine the BEP of each range using the formula. b. If the annual demand is between 580 to 660 units, how many machines should the manager purchased?arrow_forwardThe income data of SB Kopi for the years 200B and 200A are as follows: 200B 200A Variance Sales 276,000.00 204,000.00 72,000.00 F Cost of Sales 151,800.00 122,400.00 29,400.00 U Gross Profit 124,200.00 81,600.00 42,600.00 Question: the 200B cost price is higher (lower) than the 200A cost price by: (12.745%) (10%) 10% 12.745%arrow_forward
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