Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Chapter 3, Problem 61P
Method of Least Squares, Predicting Cost for Different Time Periods from the One Used to Develop a Cost Formula
Refer to the information for Farnsworth Company on the previous page. However, assume that Tracy has used the method of least squares on the receiving data and has gotten the following results:
Required:
- 1. Using the results from the method of least squares, prepare a cost formula for the receiving activity.
- 2. Using the formula from Requirement 1, what is the predicted cost of receiving for a month in which 1,450 receiving orders are processed? (Note: Round your answer to the nearest dollar.)
- 3. Prepare a cost formula for the receiving activity for a quarter. Based on this formula, what is the predicted cost of receiving for a quarter in which 4,650 receiving orders are anticipated? Prepare a cost formula for the receiving activity for a year. Based on this formula, what is the predicted cost of receiving for a year in which 18,000 receiving orders are anticipated?
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Chapter 3 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 3 - Prob. 1DQCh. 3 - What is a driver? Give an example of a cost and...Ch. 3 - Suppose a company finds that shipping cost is...Ch. 3 - Some firms assign mixed costs to either the fixed...Ch. 3 - Explain the difference between committed and...Ch. 3 - Explain why the concept of relevant range is...Ch. 3 - Why do mixed costs pose a problem when it comes to...Ch. 3 - Describe the cost formula for a strictly fixed...Ch. 3 - Describe the cost formula for a strictly variable...Ch. 3 - What is the scattergraph method, and why is it...
Ch. 3 - Describe how the scattergraph method breaks out...Ch. 3 - What are the advantages of the scattergraph method...Ch. 3 - Prob. 13DQCh. 3 - What is meant by the best-fitting line?Ch. 3 - What is the difference between the unit cost of a...Ch. 3 - Prob. 16DQCh. 3 - (Appendix 3A) Explain the meaning of the...Ch. 3 - A factor that causes or leads to a change in a...Ch. 3 - Which of the following would probably be a...Ch. 3 - Prob. 3MCQCh. 3 - In the cost formula, the term 128,000,000 a. is...Ch. 3 - In the cost formula, the term 12,000 a. is the...Ch. 3 - Prob. 6MCQCh. 3 - Prob. 7MCQCh. 3 - The following cost formula for total purchasing...Ch. 3 - An advantage of the high-low method is that it a....Ch. 3 - Prob. 10MCQCh. 3 - Prob. 11MCQCh. 3 - Prob. 12MCQCh. 3 - The total cost for monthly supervisory cost in a...Ch. 3 - Yates Company shows the following unit costs for...Ch. 3 - (Appendix 3A) In the method of least squares, the...Ch. 3 - Creating and Using a Cost Formula Big Thumbs...Ch. 3 - Using High-Low to Calculate Fixed Cost, Calculate...Ch. 3 - Using High-Low to Calculate Predicted Total...Ch. 3 - Using High-Low to Calculate Predicted Total...Ch. 3 - Using Regression to Calculate Fixed Cost,...Ch. 3 - Inventory Valuation under Absorption Costing Refer...Ch. 3 - Inventory Valuation under Variable Costing Refer...Ch. 3 - Absorption-Costing Income Statement Refer to the...Ch. 3 - Variable-Costing Income Statement Refer to the...Ch. 3 - Creating and Using a Cost Formula Kleenaire Motors...Ch. 3 - Using High-Low to Calculate Fixed Cost, Calculate...Ch. 3 - Using High-Low to Calculate Predicted Total...Ch. 3 - Brief Exercise 3-28 Using High-Low to Calculate...Ch. 3 - Using Regression to Calculate Fixed Cost,...Ch. 3 - Inventory Valuation under Absorption Costing Refer...Ch. 3 - Inventory Valuation under Variable Costing Refer...Ch. 3 - Brief Exercise 3-32 Absorption-Costing Income...Ch. 3 - Brief Exercise 3-33 Variable-Costing Income...Ch. 3 - Variable and Fixed Costs What follows are a number...Ch. 3 - Cost Behavior, Classification Smith Concrete...Ch. 3 - Prob. 36ECh. 3 - Prob. 37ECh. 3 - Prob. 38ECh. 3 - Step Costs, Relevant Range Bellati Inc. produces...Ch. 3 - Matching Cost Behavior Descriptions to Cost...Ch. 3 - Examine the graphs in Exercise 3-40. Required: As...Ch. 3 - Prob. 42ECh. 3 - Prob. 43ECh. 3 - High-Low Method Refer to the information for Luisa...Ch. 3 - Scattergraph Method Refer to the information for...Ch. 3 - Method of Least Squares Refer to the information...Ch. 3 - Use the following information for Exercises 3-47...Ch. 3 - Use the following information for Exercises 3-47...Ch. 3 - Method of Least Squares, Developing and Using the...Ch. 3 - The method of least squares was used to develop a...Ch. 3 - Identifying the Parts of the Cost Formula;...Ch. 3 - Inventory Valuation under Absorption Costing...Ch. 3 - Inventory Valuation under Variable Costing Lane...Ch. 3 - Income Statements under Absorption and Variable...Ch. 3 - (Appendix 3A) Method of Least Squares Using...Ch. 3 - (Appendix 3A) Method of Least Squares Using...Ch. 3 - Identifying Fixed, Variable, Mixed, and Step Costs...Ch. 3 - Identifying Use of the High-Low, Scattergraph, and...Ch. 3 - Identifying Variable Costs, Committed Fixed Costs,...Ch. 3 - Scattergraph, High-Low Method, and Predicting Cost...Ch. 3 - Method of Least Squares, Predicting Cost for...Ch. 3 - Cost Behavior, High-Low Method, Pricing Decision...Ch. 3 - Prob. 63PCh. 3 - Variable and Fixed Costs, Cost Formula, High-Low...Ch. 3 - Cost Separation About 8 years ago, Kicker faced...Ch. 3 - Variable-Costing and Absorption-Costing Income...Ch. 3 - Refer to the information for Farnsworth Company...Ch. 3 - (Appendix 3A) Scattergraph, High-Low Method,...Ch. 3 - (Appendix 3A) Separating Fixed and Variable Costs,...Ch. 3 - (Appendix 3A) Cost Formulas, Single and Multiple...Ch. 3 - Suspicious Acquisition of Data, Ethical Issues...
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- A total cost equation can be used to predict future costs for various activity levels. Write the total cost equation. 4. In the total cost equation: a) What is the slope? b) What is the independent variable? c) What is the dependent variable?arrow_forwardWhen using the visual-fit method to estimate a cost function, we can estimate the fixed cost by O the point where the sketched line (through all or most of the data points) intersects the y-axis O calculating the variable cost per unit of the cost driver O the point where the sketched line (through all or most of the data points) intersects the x-axis O subtracting the variable cost at any cost driver level from the total costarrow_forwardQ) Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.arrow_forward
- In determining cost behavior in business, the cost function is often expressed as Y=a+bX. Which one of the following cost estimation methods uses only two levels of activities in estimating fixed and variable costs for the predictive equation? Group of answer choices Multiple Regression Graphic Method High-low Method Simple Regressionarrow_forwardCost estimation is the process of a. Summarizing pwst costs into fixed variable components. b.Estimating the relationship between costs and the costs drivers that cause those costs. c. Documenting costs in terms of direct and indirect costs. d. All of the choicesarrow_forwardDistinguish between ( a ) a variable cost, ( b ) a mixed cost, and ( c ) a step-variable cost. Plot thethree costs on a graph, with activity plotted horizontally and cost plotted verticallyarrow_forward
- Required:i) Using the above information derive a cost function that can be used to predict the total production overheads cost using the high-low cost estimation method.arrow_forwardWhich of the following statements related to cost estimation methods is true? O a. The most complex method of cost estimation is the high-low method. O b. The high-low method is the most accurate and reliable method to determine the cost behavior compared to scatter-graph plot and least-squares regression methods. O c. The low-high method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels. O d. Only high-low method has a slope and an intercept. O . None of the given answers.arrow_forward_____Identifying the relationship between the activity and the costs is a key step in which of the following cost estimation methods? a) Scattergraph. b) High-low method. c) Linear regression. d) Account analysis.arrow_forward
- Which of the following statements related to CVP chart is not true? O a. To determine the variable cost per unit from a graph, the change in cost is divided by the change in units. O b. The scatter graph method is a way to estimate the cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels. O c. The slope of the total cost line determines the variable cost per unit. O d. To calculate the total fixed cost from a graph is by multiplying a level of volume by the variable cost per unit found out earlier and subtracting that from the total cost for that level of volume. e. The intercept between the total cost line on a graph and the y-axis determines the fixed cost. f. None of the given answers.arrow_forwardA) Write difference between absorption costing and variable costing. B) Write cost pool, cost driver, activity cost, budgeting. C) What are the assumption of CVP analysis? What is BEP point? D) Draw a CVP graph.arrow_forwardPlease answer the following: 1. What is cost of production report? 2. What is cost per equivalent unit? 3. What is Equivalent Unit of Production? 4. What is FIFO method? 5. what is Average cost method?arrow_forward
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