Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 5.A, Problem 11C
Case 5A-11 Mixed Cost Analysis and the Relevant Range LO5
The Ramon Company is a manufacturer that is interested in developing a cost formula to estimate the variable and fixed components of its monthly manufacturing
| Last Year | This Year | |||||||
| Machine | Overhead | Machine | Overhead | |||||
| Month | Hours | Hours | Hours | Costs | ||||
| January | 21,000 | $84,000 | 21,000 | $86,000 | ||||
| February | 25,000 | $99,000 | 24,000 | $93,000 | ||||
| March | 22,000 | $89,500 | 23,000 | $93,000 | ||||
| April | 23,000 | $90,000 | 22,000 | $87,000 | ||||
| May | 20,000 | $81,000 | 20,000 | $80,000 | ||||
| June | 19,000 | $75,000 | 18,000 | $76,000 | ||||
| July | 14,000 | $70,000 | 12,000 | $67,000 | ||||
| August | 10,000 | $64,000 | 13,000 | $71,000 | ||||
| September | 12,000 | $69,000 | 73,000 | $73,500 | ||||
| October | 17,000 | $75,000 | 17,000 | $72,500 | ||||
| November | 16,000 | $71,500 | 15,000 | $71,000 | ||||
| December | 19,000 | $78,000 | 18,000 | $75,000 |
The company leases all of its manufacturing equipment. The lease arrangement calls for a flat monthly fee up to 19,500 machine-hours. If the machine-hours used exceed 19,500, then the fee becomes strictly variable with respect to the total number of machine-hours consumed during the month. Lease expense is a major element of overhead cost.<
Required:
Using the high-low method, estimate a
Prepare a scatter graph using all of the data for the two-year period. Fit a straight line or lines to the plotted points using a ruler. Describe the cost behavior pattern revealed by your scatter graph plot.
Assume a least-squares regression analysis using all of die given data points estimated the total fixed cost to be $40,102 and the variable cost to be $2.13 per machine-hour. Do you have any concerns about the accuracy of the high-low estimates that you have computed or the least-squares regression estimates that have been provided?
Assume that the company consumes 22,500 machine-hours during a month. Using the high-low method, estimate the total overhead cost that would be incurred at this level of activity. Be sure to consider only the data points contained in the relevant range of activity when performing your computations.
Comment on the accuracy of your high-low estimates assuming a least-squares regression analysis using only the data points in the relevant range of activity estimated the total fixed cost to be $10,090 and the variable cost to be $3.53 per machine-hour.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Question 6
Amundsen Company makes 60,000 units per year of a part it uses in the products it manufactures. The unit product cost of
this part is computed as follows:
Direct Materials
Direct Labor
Variable Manufacturing Overhead
Fixed Manufacturing Overhead
Variable Selling
Fixed Selling
Total
$ 10.10
$17.40
$ 2.70
$15.00
$ 2.75
$ 3.25
$51.20
An outside supplier has offered to sell the company all of these parts it needs. If the company accepts this offer, the facilities
now being used to make the part would be idle and fixed manufacturing overhead would be reduced by 80% of current cost.
The variable selling costs would be reduced to 40% of current cost.
Required:
What is the maximum amount the company should be willing to pay an outside supplier per unit for the part?
Chapter 6: A Closer Look on Cost Accounting
The company makes 2,350 units of product X a year, requiring a total os
3.300 machine hours, 250 orders and 200 inspection hours per year. The
product's direct material cost is P201.50 and its direct labor cost in
P211.11 per unit. The product sells for P590 per unit. According to the
activity-based costing system, the gross margin for product X is?
423,087.50
b. 350,435.50
c. 416,890
d. None of the choice
a.
56.
The following information is available for Mary Corp.
Activity Pool
Setups
Quality Inspections
Assembly (direct labor hour)
What is the activity rate for setups?
Activity Base
50,000
120,000
400,000
Budgeted Amount
300,000
600,000
2,000,000
a. P5.09
c. РО.75
d. P58.00
b. Рб.00
The activity rate for quality inspection is:
с. Рб.00
d. P5.09
a. P5.29
b. P5.00
Question 15 of 20
Moving to another question will save this response.
Question 15
The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows:
Cost Item
EstimatedUnit Cost
Direct material
$
32
Direct labor
20
Variable manufacturing overhead
15
Fixed manufacturing overhead
6
Variable selling expenses
3
Fixed selling expenses
4
What are the estimated prime costs per unit?
$73
$52
$67
$32
Chapter 5 Solutions
Managerial Accounting
Ch. 5.A - EXERCISE 5A-1 High-Low Method LO5-10 The Cheyenne...Ch. 5.A - EXERCISE 5A-2 Least-Squares Regression LO5-11...Ch. 5.A - EXERCISE 5A-3 Cost Behavior; High-Low Method...Ch. 5.A - Prob. 4ECh. 5.A - EXERCISE 5A-5 Least-Squares Regression LO5-11...Ch. 5.A - Prob. 6PCh. 5.A - Problem 5A-7 Cost Behavior; High-Low Method;...Ch. 5.A - Problem 5A-8 High-Low Method; Predicting Cost...Ch. 5.A - Prob. 9PCh. 5.A - Prob. 10P
Ch. 5.A - Case 5A-11 Mixed Cost Analysis and the Relevant...Ch. 5.A - CASE 5A-12 Analysis of Mixed Costs in a Pricing...Ch. 5 - Prob. 1QCh. 5 - Often the most direct route to a business decision...Ch. 5 - Prob. 3QCh. 5 - What is the meaning of operating leverage?Ch. 5 - What is the meaning of break-even point?Ch. 5 - 5-6 In response to a request from your immediate...Ch. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 1AECh. 5 - Prob. 2AECh. 5 - Prob. 3AECh. 5 - Prob. 4AECh. 5 - Prob. 5AECh. 5 - Prob. 1F15Ch. 5 - Prob. 2F15Ch. 5 - Prob. 3F15Ch. 5 - Prob. 4F15Ch. 5 - Prob. 5F15Ch. 5 - Prob. 6F15Ch. 5 - Prob. 7F15Ch. 5 - Prob. 8F15Ch. 5 - Prob. 9F15Ch. 5 - Prob. 10F15Ch. 5 - Prob. 11F15Ch. 5 - Prob. 12F15Ch. 5 - Prob. 13F15Ch. 5 - Prob. 14F15Ch. 5 - Prob. 15F15Ch. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - EXERCISE 5-10 Multiproduct Break-Even Analysis...Ch. 5 - Prob. 11ECh. 5 - EXERCISE 5-12 Multiproduct Break-Even Analysis...Ch. 5 - EXERCISE 5-13 Changes in Selling Price, Sales...Ch. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Prob. 19PCh. 5 - PROBLEM 5-20 CVP Applications: Break-Even...Ch. 5 - PROBLEM 5-21 Sales Mix; Multiproduct Break-Even...Ch. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 -
PROBLEM 5-26 CVP Applications; Break-Even...Ch. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 -
PROBLEM 5-31 Interpretive Questions on the CVP...Ch. 5 - Prob. 32C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- (Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30 minutes per unit. The budgeted conversion costs for the manufacturing cell are 2,700,000 per year. The total labor minutes available are 600,000. During the year, the cell was able to produce 1.5 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per unit (the amount of conversion cost actually assigned to the product). 3. CONCEPTUAL CONNECTION Discuss how this approach to assigning conversion costs can improve delivery time performance.arrow_forwardQUESTION 7 Quiet Corp. currently makes 2000 subcomponents a year in one of its factories. The unit costs to produce are: Description Per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $4 4 2 IMI An outside supplier has offered to provide Quiet Corp. with the 2000 subcomponents at a $17 per unit price. Fixed overhead is not avoidable. If Quiet Corp. decides to buy from the outside supplier, the impact to net income will be ? If positive, enter the number, if negative, place a-sign before your numberarrow_forwardQuestion 23 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forward
- Ch. 8 Homework Question 4 Please solve and explain the following: Each visor requires a total of $4.00 in direct materials that includes an adjustable closure that the company purchases from a supplier at a cost of $1.50 each. Shadee wants to have 30 closures on hand on May 1, 20 closures on May 31, and 25 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,000 per month, and variable manufacturing overhead is $1.25 per unit produced. Required:1. Determine Shadee's budgeted cost of closures purchased for May and June 2. Determine Shadee's budget manufacturing overhead for May and Junearrow_forwardProblem 7-18 Relevant Cost Analysis in a Variety of Situations [LO 7-2, LO 7-3, LO 7-4] Andretti Company has a single product called a Dak. The company normally produces and sells 87,000 Daks each year at a selling price of $50 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 8.50 Direct labor 11.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 7.00 ($609,000 total) Variable selling expenses 4.70 Fixed selling expenses 5.50 ($478,500 total) Total cost per unit $ 39.20 A number of questions relating to the production and sale of Daks follow. Each question is independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 108,750 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the present 87,000 units each year if it were willing to increase the fixed…arrow_forwardCh. 8 Homework Question 6 Please answer and solve the following Each visor requires a total of $4.00 in direct materials that includes an adjustable closure that the company purchases from a supplier at a cost of $1.50 each. Shadee wants to have 30 closures on hand on May 1, 20 closures on May 31 and 25 closures on June 30 and variable manufacturing overhead is $1.25 per unit produced. Suppose that each visor takes 0.30 direct labor hours to produce and Shadee pays its workers $9 per hour. Required: 1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $2.) (Round your answer to 2 decimal places.) 2. Determine Shadee's budgeted cost of goods sold for May and June.arrow_forward
- 15 es [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $77 per unit in two geographic regions-East and West. The following information pertains to the company's first year of operations in which it produced 59,000 units and sold 54,000 units. Variable costs per unit: Manufacturing: Direct materials. Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $27 $ 10 $2 $3 The company sold 41,000 units in the East region and 13,000 units in the West region. It determined that $330,000 of its fixed selling and administrative expense is traceable to the West region, $280,000 is traceable to the East region, and the remaining $52,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of…arrow_forwardQuestion 17 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forward< High-Low Method The manufacturing costs of Rosenthal Industries for the first three months of the year follow: Total Costs Production January February $259,200 2,025 units 264,960 3,760 403,200 6,525 Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. a. Variable cost per unit b. Total fixed cost March Check My Work 2 more Check My Work uses remaining.arrow_forward
- Question 22 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forwardQuestion 16 Norton's Mufflers manufactures two different product lines, Model X and Model Y. Market demand for Model X is 4,000 per month and demand for Model Y is 5,500 per month. The available machine hours are 20,000 per month for Norton's molding machine, needed for all models. The following per unit data apply: Model X Model Y $80 Selling price Direct materials Direct labor ($10 per hour) $15 Variable support costs ($5 per machine-hour) $10 Fixed support costs $20 $30 How many units of Model X should be produced? - $90 $30 $15 $15 $20arrow_forwardQuestion 11 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cost Classifications - Managerial Accounting- Fixed Costs Variable Costs Direct & Indirect Costs; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=QQd1_gEF1yM;License: Standard Youtube License