Chapter 10 Solutions

Chapter 10 Solutions - (Selected CHAPTER 10 DETERMINING HOW...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
(Selected) CHAPTER 10 DETERMINING HOW COSTS BEHAVE 10-16 (10 min.) Estimating a cost function. 1. Slope coefficient = = $3,900 - $3,000 7,000 - 4,000 = $900 3,000 = $0.30 per machine-hour Constant = Total cost – (Slope coefficient × Quantity of cost driver) = $3,900 – ($0.30 × 7,000) = $1,800 = $3,000 – ($0.30 × 4,000) = $1,800 The cost function based on the two observations is Maintenance costs = $1,800 + $0.30 × Machine-hours 2. The cost function in requirement 1 is an estimate of how costs behave within the relevant range, not at cost levels outside the relevant range. If there are no months with zero machine- hours represented in the maintenance account, data in that account cannot be used to estimate the fixed costs at the zero machine-hours level. Rather, the constant component of the cost function provides the best available starting point for a straight line that approximates how a cost behaves within the relevant range. 10-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
10-17 (15 min.) Identifying variable-, fixed-, and mixed-cost functions. 1. See Solution Exhibit 10-17. 2. Contract 1: y = $50 Contract 2: y = $30 + $0.20 X Contract 3: y = $1 X where X is the number of miles traveled in the day. 3. Contract Cost Function 1 2 3 Fixed Mixed Variable SOLUTION EXHIBIT 10-17 Plots of Car Rental Contracts Offered by Pacific Corp. 10-2
Background image of page 2
10-19 (30 min.) Matching graphs with descriptions of cost and revenue behavior. a. (1) b. (6) A step-cost function. c. (9) d. (2) e. (8) f. (10) It is data plotted on a scatter diagram, showing a linear variable cost function with constant variance of residuals. The constant variance of residuals implies that there is a uniform dispersion of the data points about the regression line. g. (3) h. (8) 10-3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
10-21 (30 min.) Account analysis method. 1. Manufacturing cost classification for 2006: Account Total Costs (1) % of Total Costs That is Variable (2) Variable Costs (3) = (1) × (2) Fixed Costs (4) = (1) – (3) Variable Cost per Unit (5) = (3) ÷ 75,000 Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, admin $300,000 225,000 37,500 56,250 60,000 75,000 95,000 100,000 100% 100 100 20 50 40 0 0 $300,000 225,000 37,500 11,250 30,000 30,000 0 0 $ 0 0 0 45,000 30,000 45,000 95,000 100,000 $4.00 3.00 0.50 0.15 0.40 0.40 0 0 Total $948,750 $633,750 $315,000 $8 .45 Total manufacturing cost for 2006 = $948,750 Variable costs in 2007: Account Unit Variable Cost per Unit for 2006 (6) Percentage Increase (7) Increase in Variable Cost per Unit (8) = (6) × (7) Variable Cost per Unit for 2007 (9) = (6) + (8) Total Variable Costs for 2007 (10) = (9) × 80,000 Direct materials Direct manufacturing labor Power Supervision labor Materials-handling labor Maintenance labor Depreciation Rent, property taxes, admin. $4.00
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 17

Chapter 10 Solutions - (Selected CHAPTER 10 DETERMINING HOW...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online