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Exam 10: Determining How Costs Behave

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Question 71

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Multicollinearity exists in multiple regression when two or more independent variables are highly correlated with each other.

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Question 72

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The cost function y = 300 + 2X ________.

A) has a slope coefficient of 300
B) has an intercept of 300
C) is a nonlinear
D) represents a fixed cost

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Question 73

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Yancy Company manufactures chairs.Because the efforts of manufacturing are approximately equal between labor and machinery,management is considering other possible cost drivers.By considering different cost drivers,it is anticipated that the estimating process can be improved.The following cost estimating equations with their r² values have been determined for 2017: Required: a.Which equation should be selected for the analysis? b.What other factors should be included in the selection of the estimating equation?

As part of his job as cost analyst,John Kelly collected the following information concerning the operations of the Machining Department: $\begin{array}{lll}\text { Observation }&\text { Machine-hours }&\text { Total Operating Costs }\\\text { January } & 4,700 & \$ 43,000 \\\text { February } & 5,060 & 45,395 \\\text { March } & 4,180 & 42,535 \\\text { April } & 4,500 & 43,600 \\\text { May } & 4,250 & 42,890\end{array}$ Required: a.Use the high-low method to determine the estimating cost function with machine-hours as the cost driver. b.If June's estimated machine-hours are 4,300,calculate the total estimated costs of the Machining Department?

At the Spring Valley Company,the cost of the personnel department has always been charged to production departments based upon number of employees.Recently,opinions gathered from the department managers indicate that the number of new hires might be a better predictor of personnel costs. If the number of employees is considered the cost driver,what amount of personnel costs will be allocated to Department A? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar. )

The major advantages of quantitative methods are that they are objective,so managers can use them to evaluate different cost drivers.

When new products are introduced,learning-curve effects can have a major influence on production scheduling.

The cost of the personnel department at the Speedy Process Company has always been charged to the production departments based upon number of employees.Recently,opinions gathered from the department managers indicated that the number of new hires might also be a predictor of personnel costs to be assigned.Total personnel department costs are $200.000. Required: Using the above data,prepare a report that contrasts the different amounts of personnel department cost that would be allocated to each of the production departments if the cost driver used is: a.number of employees. b.the number of new hires. c.Which cost estimation method is being used by Speedy Company?

A cost function is a ________.

Why is choosing the correct cost driver to estimate indirect manufacturing costs important?

The Michigan Manufacturing Company has provided the following information: Using the high-low method and the information provided above, a.identify the linear cost function equation and b.estimate the total cost at 38,000 units of output.

Bennet Company employs 20 individuals.Eighteen employees are paid $18 per hour and the rest are salaried employees paid $3,000 a month.Which of the following is the total cost function of personnel?

Data collection problems arise when ________.

In a cost function y = 18,000,the slope coefficient is zero.

Quantum Company uses the high-low method to estimate the cost function.The information for 2017 is provided below: What is the estimated cost function for the above data?

The advantages of the high-low method to estimate a cost function is that it is easy and accurate.

If a cost item is fixed for one cost object,it will be fixed for all cost objects for which it is associated.

Crimson Services,Inc. ,employs 8 individuals.They are all paid $16.50 per hour.How would total costs of personnel be classified?

The cost components of a heater include $35 for the compressor,$11 for the sheet molded compound frame,and $74 per unit for assembly.The factory machines and tools cost is $55,000.The company expects to produce 1,300 heaters in the coming year.What cost function best represents these costs?

High Tech Manufacturing Inc. ,incurred total indirect manufacturing labor costs of $480,000.The company is labor intensive.Total labor hours during the period were 4,400.Using qualitative analysis,the manager and the management accountant determine that over the period the indirect manufacturing labor costs are mixed costs with only one cost driver-labor-hours.They separated the total indirect manufacturing labor costs into costs that are fixed ($130,000 based on 8,100 hours of labor) and costs that are variable based on the number of labor-hours used.The company has estimated 7,700 labor hours during the next period. What will be the total cost for the estimated 7,700 hours? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar. )