Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 5, Problem 5.3E
The controller of Norton Industries has collected 6the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
| Month | Total Maintenance Costs | Total Machine Hours |
| January | $2,700 | 300 |
| February | 3,000 | 350 |
| March | 3,600 | 500 |
| April | 4,500 | 690 |
| May | 3,200 | 400 |
| June | 5,500 | 700 |
Instructions
(a) Determine the fixed- and variable-cost components using the high-low method.
(b) Prepare a graph showing the behavior of maintenance costs, and identify the fixed- and variable-cost elements. Use 100-hour increments and $1,000 cost increments.
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Determine fixed and variable costs using the high-low method and prepare graph.
E2.26 (LO 3) The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behaviour of maintenance costs.
Total Maintenance Costs
Total Machine Hours
Month
January
February
March
April
May
June
$2,500
3,000
3,600
4,500
3,200
4,900
300
350
500
690
400
700
Instructions
a. Determine the fixed and variable cost components using the high-low method.
b. Prepare a graph showing the behaviour of maintenance costs, and identify the fixed and variable cost components. Use 100-hour increments and $1,000 cost
increments.
The controller of the Blade Company wants you to estimate a cost function from the following two observations in a general ledger account called Maintenance:
(Click to view the information.)
Required
1. Estimate the cost function for maintenance.
2. Can the constant in the cost function be used as an estimate of fixed maintenance cost per month? Explain.
Requirement 1. Estimate the cost function for maintenance. (Round your answers to the nearest cent as needed.)
Maintenance costs =
Maintenance costs =
+(
+(
X
X
Requirement 2. Can the constant in the cost function be used as an estimate of fixed maintenance cost per month? Explain.
the relevant range, not at cost levels
the relevant range. If there are no months with zero
The cost function in requirement 1 is an estimate of how costs behave
machine-hours represented in the maintenance account, data in that account
function provides the best available starting point for a straight line that approximates how a cost behaves
be used to…
Write a linear cost function equation for each of the following conditions. Use y for estimated costsand X for activity of the cost driver.
Machine operating costs include $1,000 of maintenance per month, and $15.00 of coolant usagecosts for each day the machinery is in operation.
Chapter 5 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 5 - (a) What is cost behavior analysis? (b) Why is...Ch. 5 - (a) Scott Winter asks your help in understanding...Ch. 5 - Contrast the effects of changes in the activity...Ch. 5 - J. P. Alexander claims that the relevant range...Ch. 5 - The relevant range is indispensable in cost...Ch. 5 - Prob. 6QCh. 5 - How should mixed costs be classified in CVP...Ch. 5 - At the high and low levels of activity during the...Ch. 5 - "Cost-volume-profit (CVP) analysis is based...Ch. 5 - Faye Dunn defines contribution margin as the...
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 14QCh. 5 - Define the term margin of safety. If Revere...Ch. 5 - Prob. 16QCh. 5 - Prob. 17QCh. 5 - Monthly production costs in Dilts Company for two...Ch. 5 - Prob. 5.2BECh. 5 - For Wesland Company, a mixed cost is 15,000 plus...Ch. 5 - Bruno Company accumulates the following data...Ch. 5 - Markowis Corp. has collected the following data...Ch. 5 - Determine the missing amounts.Ch. 5 - Russell Inc. had sales of 2,20O,0O0 for the first...Ch. 5 - Rice Company has a unit selling price of 520,...Ch. 5 - Presto Corp. had total variable costs of 180,000....Ch. 5 - For Flynn Company, variable costs are 70% of...Ch. 5 - Prob. 5.11BECh. 5 - Prob. 5.12BECh. 5 - Amanda Company reports the following total costs...Ch. 5 - Westerville Company accumulates the following data...Ch. 5 - Prob. 5.3DICh. 5 - Snow Cap Company has a unit selling price of 250,...Ch. 5 - Presto Company makes radios that sell for 30 each....Ch. 5 - Bonita Company manufactures a single product....Ch. 5 - Shingle Enterprises is considering manufacturing a...Ch. 5 - The controller of Norton Industries has collected...Ch. 5 - Family Furniture Corporation incurred the...Ch. 5 - The controller of Hall industries has collected...Ch. 5 - PCB Corporation manufactures a single product....Ch. 5 - Marty Moser wants Moser Company to use CVP...Ch. 5 - All That Blooms provides environmentally friendly...Ch. 5 - The Palmer Acres Inn is trying to determine its...Ch. 5 - In the month of March, Style Salon services 560...Ch. 5 - Spencer Kars provides shuttle service between four...Ch. 5 - In 2016. Manhoff Company had a break-even point of...Ch. 5 - Billings Company has the following information...Ch. 5 - Naylor Company had 210,000 of net income in 2016...Ch. 5 - Yams Company reports the following operating...Ch. 5 - Glacial Company estimates that variable costs will...Ch. 5 - Felde Bucket Co., a manufacturer of rain barrels,...Ch. 5 - Vin Diesel owns the Fredonia Barber Shop. He...Ch. 5 - Jorge Company bottles and distributes B-Lite, a...Ch. 5 - Tanek Corp.'s sales slumped badly in 2017. For the...Ch. 5 - Mary Willis is the advertising manager for Bargain...Ch. 5 - Prob. 5.5APCh. 5 - Kaiser Industries carries no inventories. Its...Ch. 5 - Bill Johnson, sales manager, and Diane Buswell,...Ch. 5 - Creative Ideas Company has decided to introduce a...Ch. 5 - The condensed income statement for the Peri and...Ch. 5 - Prob. 5.3BYPCh. 5 - Prob. 5.4BYPCh. 5 - Your roommate asks for your help on the following...Ch. 5 - Prob. 5.6BYPCh. 5 - Cost-volume-profit analysis can also be used in...
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