Reference no: EM13512944

Labor hours and production costs for the last four months of 19A, which you believe are representative for the year, were

Month	Labor Hours	Total Production Cost
September	2,500	$ 20,000
October	3,500	25,000
November	4,500	30,000
December	3,500	25,000
	14,000	$100,000

Based on the above information, select the best answer for questions 1 through 6.

Let a = fixed production costs per month

b = variable production costs per labor hour

n = number of months

x = labor hours per month

y = total monthly production costs

C = summation

 

1. The equation(s) required for applying the least-squares method of computation of fixed and variable production costs could be expressed as:

(a) Cxy = aCx + bCx2

(b) Cy = na + bCx I:y=na+bI:x

(c) y = a+bx2

(d) Cxy = aCx+ bCx2

C y = na + bC x

 

2. The cost function derived by the least-squares method:

(a) Is linear

(b) Must be tested for minima and maxima

(c) Is parabolic

(d) Indicates maximum costs at the point of the function's inflection

 

3. Monthly production costs are expressed as:

(a) y = ax+b (c) y=b+ax

(b) .y =a+bx (d) y=Ca+bx

 

4.The fixed monthly production cost in total is: (a) $10,000; (6) $9,500; (c) $7,500; (d)$5,000.

 

5. The variable production cost per labor hour is: (a) $6; (b)$5; (c)$3; (d)$2.

 

6. The least-squares method of cost analysis must be used in those situations where:

(a) The mixed costs being analyzed consist of more than 50 percent fixed costs.

(b) The variable portion of the mixed cost is constant per unit of activity.

(c) The fixed costs being analyzed are discretionary rather than committed.

(d) The variable portion of the mixed cost being analyzed must be determined in terms of some average amount per unit of activity.