Reference no: EM132527592
Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is provided below:
Machine-hours Labor Costs
Highest observation of cost driver 550 $22,000
Lowest observation of cost driver 250 $ 13,000
Question 1: What is the estimated cost function for the above data?
A) y = 13,000 + 43.75X
B) y = 5,500 + 30X
C) y = 22,000 + 40X
D) y = 16,500 + 52X
Question 2: The smaller the residual term in the regression analysis, the:
A) stronger the relationship between the cost driver and costs
B) weaker the relationship between the cost driver and costs
C) steeper the slope of the cost function
D) gentler the slope of the cost function
Each time Mayberry Nursery hires a new employee, it must wait for some period of time before the employee can meet production standards. Management is unsure of the learning curve in its operations but it knows the first job by a new employee averages 40 hours and the second job averages 32 hours. Assume all jobs to be equal in size.
Question 3: What is the learning-curve percentage, assuming the cumulative average-time method?
A) 0.9
B) 0.85
C) 0.8
D) 0.75
Mertens Company provides the following ABC costing information:
Activities Total Costs Activity-cost drivers
Account inquiry hours $200,000 10,000 hours
Account billing lines $140,000 4,000,000 lines
Account verification accounts $75,000 40,000 accounts
Correspondence letters $ 25,000 4,000 letters
Total costs $440,000
The above activities are used by Departments A and B as follows:
Department A Department B
Account inquiry hours 2,000 hours 4,000 hours
Account billing lines 400,000 lines 200,000 lines
Account verification accounts 10,000 accounts 8,000 accounts
Correspondence letters 1,000 letters 1,600 letters
Question 4: How much of the account inquiry cost will be assigned to Department A?
A) $40,000
B) $200,000
C) $80,000
D) None of these answers are correct.